The IRS is getting into the 2023 season with an $80 billion funding boost. This measure, signed by President Joe Biden under the Inflation Reduction Act, aims to empower the agency to achieve its mandates better. This translates to an agency with boosted workforce and capacity to adopt new technologies and techniques to ease operations.
Are my chances of being audited by the IRS in 2023 higher?
According to the IRS strategic operating plan, the agency intends to leverage its funding by increasing its tax audits. The focus will primarily be on wealthy taxpayers and businesses with complex tax returns. Regardless, this does not mean that the average taxpayer should not be on the lookout, as an emboldened IRS will definitely be taking a closer look at your returns.
Since the IRS intends to use data and analytics to determine who it audits, your chances of being audited will be high if you:
- Are a millionaire
- Fail to report all your income
- Claim unusual deductions
- Are misclassified
- Have a business/sole proprietorship that shows a pattern of losses
- Have transacted with an individual that has recently been audited
How does the IRS audit conduct its audits?
The IRS manages its audits either through an in-person interview or by mail. Mail audits are the most common type, and as a taxpayer, you will receive a letter requesting for specific information or details about your finances or tax status. You will then be expected to respond to the mail before the stipulated time runs out.
For an in-person interview, you will have a one-on-one session with an IRS agent at your workplace, home, accountant’s office, or a local IRS office. Like mail audits, you will first receive a letter notifying you about the audit and the specific issues the agency will look into.
How do I prepare for an IRS audit?
It is no secret that IRS audits are scary for most taxpayers. However, it is important to remember that these audits are typically examinations and not investigations. This implies that being under an audit does not make you a suspect of any wrongdoing and often just involves confirmation of specific details about your finances or tax returns.
Still, it is important to be well-prepared for your audit, and the best way to do this is by:
- Understanding the purpose of the audit
The letter you receive from the IRS should guide you on the purpose of the audit and what is required from you. It is highly advisable that you hire a tax attorney to help you break down the letter’s content and understand what the agency requires.
- Getting all the required documentation
Well-kept records are your shield when it comes to tax audits, as each piece of documentation you present answers critical questions about your finances and tax status.
- Having a tax attorney by your side
It is critical to have by your side a tax attorney who understands the complex tax code and is committed to helping you avoid costly mistakes and oversights that could complicate your audit.
Face Your IRS Audits with Confidence
As a taxpayer, you do not have to worry about changes to the IRS audit program when you have access to reputable tax attorneys who are only a phone call away from helping you.
Contact us today and say goodbye to all worries about that IRS audit.
