As a resident or business owner in Walnut Creek you may have questions regarding tax audits and examinations. Talking to an attorney at Weed Law Group can help you know what to expect during the process and can help alleviate any stress or uncertainty you may have. Let’s look at what you need to know about tax audits & tax examination in Walnut Creek.
What Is an IRS Audit?
An audit is a full review of your financial records by the Internal Revenue Service (IRS). During an audit, the IRS will assess whether all information included on your tax return is accurate and if those taxes were reported correctly.
The purpose of an audit is to ensure that taxpayers are paying their fair share of taxes. Depending on the outcome, an audit may result in additional taxes due or a refund for overpayment.
When Does the IRS Conduct an Audit?
The IRS can conduct an audit at any time, although there are certain factors that increase your chances of being audited. Some common factors include filing incorrect information or failing to report significant income sources.
Additionally, if there are inconsistencies between your personal information and that which was reported by third parties such as employers or banks, it increases your chances of being audited.
The IRS also randomly selects returns for tax audits & tax examination in Walnut Creek each year as part of their annual compliance program called “random selection” or “computer-screening” process.
What Is a Tax Examination?
Tax examination is like an audit but is less comprehensive because it focuses on one particular issue rather than reviewing all aspects of your return like an audit would do. During a tax examination, the IRS investigates one specific area such as deductions claimed, income sources not reported, etc., while still maintaining control over other parts of the return like they do with an audit.
Common issues that trigger a tax examination include claiming too many deductions relative to income levels, not reporting substantial amounts from investments or gambling winnings, or other similar things, where some form of inquiry by the IRS would be required before submitting a notice for assessment, refund, or tax due.
