{"id":30538,"date":"2021-01-10T19:23:45","date_gmt":"2021-01-10T19:23:45","guid":{"rendered":"https:\/\/makemoneyinlife.com\/?p=30538"},"modified":"2021-01-11T19:12:23","modified_gmt":"2021-01-11T19:12:23","slug":"defending-your-tax-audit-what-you-must-know","status":"publish","type":"post","link":"https:\/\/makemoneyinlife.com\/defending-your-tax-audit-what-you-must-know","title":{"rendered":"Defending your Tax Audit: What you must Know"},"content":{"rendered":"\n
If you are a business owner or wish to start a business, then you must familiarize yourself with tax audits.<\/p>\n\n\n\n
Internal Revenue Services (IRS) can access your financial information, based on fraud suspicions. It is when there are discrepancies found in the financial statements of any business that the IRS usually interferes.<\/em><\/p>\n\n\n\n However, it is noteworthy that they are not always right. In other words, there could be times when the IRS’s suspicions could be false.<\/p>\n\n\n\n In that case, you must also know how you can defend against a tax audit.<\/p>\n\n\n\n But before that, you must know how vulnerable your business could be.<\/p>\n\n\n\n In this article, you can find all the necessary information you need to defend your business against coaxed tax audits.<\/p>\n\n\n\n Know the types of Tax Audits<\/strong><\/p>\n\n\n\n To your surprise, not all audits are all the same. Depending upon the suspicions and discrepancies, the IRS can audit your business<\/a> for four reasons. Hence, the four types of tax audits.<\/p>\n\n\n\n Correspondence Audit<\/strong><\/p>\n\n\n\n One of the most common reasons for IRS audits is when the information you share and the one that the department has does not match. You may receive a 566 Letter notice, asking you to share more information about specific expenses or income in your return. Or otherwise, you may receive a Notice CP2000 to adjust underpayment or overpayment of your taxes.<\/p>\n\n\n\n For instance, you might include an expense twice which could reduce the tax that you may have to pay. Or otherwise, \u201cdouble taxation\u201d<\/a> might be another instance for the IRS to question your returns. In either case, you would need to respond back to the notice specifying whether you agree or not.<\/p>\n\n\n\n Field Audit<\/strong><\/p>\n\n\n\n The second type of tax audit is an extensive process<\/a> and could involve a thorough inspection of your business records. Usually, the Revenue Officers would physically visit your business for inspections.<\/p>\n\n\n\n It is noteworthy that they may try to expand the scope of the inspection. And for this purpose, they are most likely to interview your employees and staff. Anything that you or your employees say can be used against you.<\/p>\n\n\n\n TCMP Audit<\/strong><\/p>\n\n\n\n The third type of audit that you may face is a TCMP (Taxpayer Compliance Measurement Program) notice from the revenue department. Notably, these are not very common, since the IRS only audits a select few businesses to evaluate DIF scores.<\/p>\n\n\n\n A Discriminant Function System Score, or DIF score, is what helps the IRS determine the compliance<\/a> of businesses every year. It is essentially a tool for the IRS to know how well the country’s businesses are abiding by the tax laws.<\/p>\n\n\n\n Office Audit<\/strong><\/p>\n\n\n\n Lastly, you may receive a notice to appear in the IRS office for questioning. Office audits are usually not as extensive as field audits, but they are also not as simple as correspondence audits.<\/p>\n\n\n\n