Scary Tax Situations – Who You Gonna Call?
Who You Gonna Call? Mize(busters)!
‘Tis the season for ghouls, goblins, and spooks! But not all scary situations involve a ghostly presence. If you find yourself in one of these frightening circumstances, give us a call:
You’ve Got Mail – From the IRS!
You know the kind of mail we’re talking about – those dreaded, computer-generated tax notices from the IRS. Sometimes these notices are actually based in reality, but sometimes the IRS paper backlog just hasn’t matched up tax returns and payments. In any case, don’t ignore these notices. Forward them to your friendly Mize relationship manager and we’ll take care of them on your behalf.
The IRS Comes for a Visit
According to a recent Government Accountability Office (GAI) report, IRS audit rates are historically low. But if your tax return gets selected for an audit, that’s cold comfort. And you may have heard that the recent Inflation Reduction Act provided funding to the IRS to improve customer service, upgrade technology, and – oh yeah – increase audits for high-income taxpayers. What’s a law-abiding taxpayer to do?
Just like the Scouts, be prepared. Keep backup documentation for everything you report on your tax return (and keep it all in one place so you know where it is). That means keeping receipts, invoices, bills, cancelled checks, and receipts for at least three and sometimes seven years. See our Business Records Retention Guide and our Individual Records Retention Guide.
Normally, a return can be selected for an audit within three tax years, and an audit normally won’t begin until a year or more after you file a return. Some tax returns are more likely to be selected for an audit than others. For example, if this year’s return is significantly different than previous years, that’s a red flag. Another flag is reporting substantially different gross profit margins, expenses, or owner’s compensation as compared to other businesses in your industry, And the IRS may want to take a closer look if you’re claiming unusually high deductions.
Certain kinds of deductions may trigger an audit, such as automobile and travel expense deductions. As mentioned above, it’s important to maintain accurate backup documentation for any deductions you claim.
If you’re selected for an audit, the IRS will notify you by letter (not by email or text message – those are scams and should be ignored). If you don’t respond to the letter, they may follow up with a phone call. Some audits simply request that you mail in copies of your backup documentation to support certain deductions. And infrequently, you may have an in-person field audit with IRS personnel. In any case, you’ll have time to prepare and gather the relevant information.
We’re here to help. We can assist you in determining what the IRS is requesting, gathering the relevant information, and responding to the auditor’s inquiries. So if you hear from the IRS, take a deep breath, don’t panic, and give us a call!