What Will You Do When You Receive Notice Of Tax Audit?
It is typical for accounting firms to add audit protection insurance among their client service offerings as protection against the significant costs that may be incurred in case the government’s decides to undertake a tax audit. Even if it is eventually found out that no adjustments are required, the audit activity will still result into considerable professional fees.
The mere thought of undergoing a tax audit is enough for many persons to feel like they are going to have a heart attack. Yes, indeed, many individuals are terrified that they may be among those who will be chosen for tax audit. However, you will certainly avoid the overwhelming fear if you make the effort to file the tax returns accurately.
A simple error in tax returns can trigger an audit. Usually, it is a missing income or an unbelievable number of deductions with numbers that look too tidy. If you do not have the necessary paperwork to support a deduction, forget about claiming it; it is definitely not worth a headache.
It is also important to keep a copy of the tax returns that were submitted for the last 3 years because a tax audit usually covers that time frame. However, if a major error was discovered by IRS, it can audit your tax returns for the past 6 years.
A great percentage of tax audits are conducted solely through mail although there are instances when IRs does it in person. If you are one of the unlucky few who received a letter that your tax return will be audited in areas like medical expenses and charitable giving, respond immediately with the information they require like the receipt of the donation to a charitable institution so that the audit process will be quick and stress-free. It is also important to have an accountant because they can represent you in front of IRS.
However, you can further minimize stress through audit protection insurance because of the shield it offers. If the accountant asks you to participate in the audit insurance, grab the opportunity because it is for your best benefits. You get insurance cover for the current year’s tax returns as well as previous returns.