What is an Income Tax Audit?
A portion of the taxes paid by corporations, and usually most of taxes paid by individuals are income taxes. Since corporation may pay tax on capital instead of income for the same purpose, the corporate tax is not always income tax. When an entity’s return fails to meet some essential criteria, it is reviewed and eventually submitted to tax auditors for audit. In this situation, the taxpayer has to submit all requested documents to the tax auditor for examination. Following his or her examination, the auditor will determine if either additional tax is due or no changes will be made to the return as filed.
When the IRS thinks that you haven’t paid your fair share of taxes, they may perform an “income Tax audit” of your tax return. They usually come to this conclusion when they think either you 1) haven’t reported all your income, or 2) made deductions you shouldn’t have. In an income tax audit, you meet with an IRS officer who asks you about your tax return. You’ll have to convince the officer that you fully reported all your income and that all the deductions you declared were appropriate. If you succeed, your tax return will be closed and you have nothing to worry about. If you don’t succeed, then you may be subject to additional taxes and monetary penalties. Therefore it is very important to keep your expense records that substantiate the deductions that you claimed on your tax return.
An income tax audit is an inspection conducted by a government representative to confirm that someone’s taxes were prepared correctly. Tax audits are very intimidating for most taxpayers, and the important thing to remember about audit notices is that they are not accusations, and that taxpayers are not being required to prove that they are not guilty of something when they are audited. Audits are usually performed on an entirely random basis, with taxpayers being selected by a computer. In an income tax audit, the taxpayer is required to show documentation and support for every aspect of his or her tax return. For example, if someone claims itemized deductions, receipts for those deductions must be produced, in addition to justifications for why the taxpayer felt that those deductions were legitimate. In addition, taxpayers must open their accounting methods to inspection, and demonstrate that all of their income was in fact properly documented and claimed on the tax return. Audits ar
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