Home » Aron Govil: What Is The Purpose Of Audit By The Internal Revenue Service (IRS)?

Aron Govil: What Is The Purpose Of Audit By The Internal Revenue Service (IRS)?

by Saloni Singh
Aron Govil

The purpose of an audit by the Internal Revenue Service (IRS) is to ensure that taxpayers are in compliance with tax laws. 

An IRS audit may be conducted for a variety of reasons, including but not limited to: Aron Govil

  • A discrepancy between the information on a taxpayer’s tax return and the information reported to the IRS by other sources, such as employers or banks
  • Filing a false or fraudulent tax return
  • Claiming too many deductions or credits on a tax return
  • Owing back taxes or other outstanding debts to the IRS
  • Being suspected of engaging in tax evasion or other criminal activities

What Happens During An IRS Audit?

If the IRS decides to conduct an audit of your tax return, you will be notified by mail. The letter will explain the reason for the audit and provide instructions on how to schedule an appointment with an IRS auditor.

The IRS auditor will review your tax return and related documentation, and ask you questions about your return and the information it contains. You may be asked to provide additional documentation or to explain certain items on your return.

If you are found to be in compliance with tax laws, the audit will be completed and no further action will be taken. If you are not in compliance, the IRS may take enforcement action, including assessment of back taxes, penalties, and interest.

What Can I Do To Prepare For An IRS Audit?

Taxpayers can take a number of steps to make an audit go smoothly and to minimize the amount of back taxes, interest, and penalties they will need to pay.

Keep accurate financial records. It is recommended that taxpayers keep documentation of all income earned and expenses incurred for at least three years after they file their tax return – longer if they are being audited by the IRS. This documentation should include prior year’s returns or tax forms, receipts for business or personal expenditures, loan documents, bank deposit slips, check registers, credit card statements, invoices from contractors or service providers working on a taxpayer’s home or business property, etc. In addition to providing backup documentation for items reported on a tax return, these records may also be helpful in resolving issues raised by the IRS during an audit.

Prior to filing a tax return, taxpayers should ensure they understand which deductions and credits are allowed for that year and which ones have expired or been repealed. This information is available in the instructions for preparing federal income tax returns, on the IRS website, and from any number of other sources.

Taxpayers should also be familiar with how their taxable income is calculated (e.g., add all wages together and subtract certain allowable deductions such as contributions to a 401(k) or IRA). If they don’t feel confident doing this calculation on their own, it is recommended that they seek professional help in preparing their return.

Keep written records of all conversations with an accountant or bookkeeper who prepares a taxpayer’s tax return.

The Internal Revenue Service (IRS) may request additional information, documentation, or schedule an on-site audit if it suspects a taxpayer of engaging in tax evasion or other criminal activities. Taxpayers should be prepared to explain any questionable deductions or credits claimed on their return and provide additional documentation that supports their claims.

If you receive notification of an IRS audit by mail, take some time before your appointment to organize your records and verify all information included on your tax return. This will help speed up the audit process and minimize errors that could result in assessments of back taxes, fines, or other penalties. You can also ask for a summary report prior to your meeting with the auditor

If you are unable to resolve a particular issue or claim with the IRS, you may be able to appeal the decision. This process is very time-consuming and complicated, so it is recommended that you seek help from an accountant, attorney, financial advisor, or other professional prior to filing any documents.

What Should I Do If I Find Out That Another Person Has Accessed My Tax Information?

If you discover that someone else has accessed your tax information without your authorization, report this incident. Be ready to provide the name of anyone who has had access to your records or copies of any correspondence you received notifying you that unauthorized access has been attempted. You will also want to prepare for an audit if it appears that someone has used your information to file a false tax return or that an individual is using your identity to commit other forms of fraud.

Conclusion:

Tax evasion is a federal crime. Aron Govil suggested in order to prove that a taxpayer evaded their tax liabilities, the IRS must show that the individual acted willfully and with intent to defraud. This means that unintentional errors in filing or reporting income cannot be punished as tax evasion.

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