tax inspectionWHAT TO DO WHEN YOU ARE CHECKED BY THE IRS

The New Year tax return season has kicked off once again. Tax returns are something that every taxpayer living in the United States cannot run away from. Everyone must not disregard the standard tax return process every year, because the tax return is incorrect, ranging from paying taxes to fines, and even most likely leading to confiscation of properties and criminal lawsuits. Tax Evasion is a serious crime in the United States of America, with a maximum penalty of 5 years in jail plus a fine of $ 250,000.

                                                                                                         

The individuals that have been offered citizenship by the Government of the United States or are naturalized in the United States should also pay special attention. Even though they don’t reside in the United States, they must declare their total income every year. Do not think that you do not need to file a tax if you do not live in the United States. However, if you live overseas, you can automatically enjoy a two-month tax return extension, which is to submit the tax return before June 15; but if you have tax arrears, you still have to pay the full amount before April 15 or the IRS will charge interest.

 

However, every taxpayer wants to pay less tax, but they are all afraid of getting in trouble by the IRS Audit tax check. In fact, Tax Avoidance in the United States is completely legal.

The Internal Revenue Service (IRS) also has many initiatives and programs to make sure that every taxpayer gets a reduced tax and to also help taxpayers resolve tax related problems. Typically, the objective of the Internal Revenue Service (IRS) is to make the lives of the taxpayers easier and better.

 

Tax Deductions: Eliminates different expenses allowed by the IRS from the income, reduces the taxable income and thus reduces the income tax payable.

Deferral Tax (tax deferred): deferred tax needs time to save money such as IRA, SEP-IRA or 401 (k) and other retirement plans, you can wait until retirement withdrawals to pay taxes again.

Tax Credits: Tax reliefs provided by the government for specific situations can be deducted directly from the amount of tax payable, and you can get a refund if you have more, such as Child Tax Credit and Child and Dependent Care Credit, Low Income Family Tax Credit Earn Income Credit, American Opportunity Tax Credit and Lifetime Learning Credit for education, etc.

As long as you meet the corresponding conditions, you can safely declare these tax deductions and reductions and legally reduce the income tax you need to pay.

Tax Audit is only required by the IRS Internal Revenue Service or the State Taxation Bureau to verify and verify that the contents of your tax return are correct. The tax check does not mean that your tax return is a problem. As long as the declaration is true, you only need to submit the relevant supporting documents when checking the tax, and you don’t need to worry too much. Sometimes the IRS tax inspection is only a random spot check, but more often, it is because some suspicious circumstances trigger the review mechanism.

How many people are taxed by the IRS every year?

According to the IRS official website, in 2018, the IRS reviewed a total of about 1 million tax returns, accounting for only 0.5% of the total number of tax returns in 2017 (in fact, only a small number of people will be spot-checked); and 74.8% of the tax checks were completed by mail, The other 25.2% need to be conducted face-to-face.

How many years do IRS taxes check?

Generally speaking, the IRS will only review the tax returns within the last 3 years. However, if you are found to have underreported 25% or more of your income, the IRS will retrospect the tax returns for the last 6 years.

 

Taxpayers are required by law to keep all tax return information for at least 3 years, so after tax returns are filed each year, all tax return related information and documents should be kept and sorted and summarized by year. For safety, in addition to the originals, you can scan and organize all the information into an electronic format and save it on the cloud disk, which can be more at ease.

How does the IRS inform me about tax investigations?

The IRS will only send notices of tax review via USPS mail , and will not notify you by telephone, E-mail, SMS, etc., nor will it charge you a fine for arrears.

If you receive phone calls, emails, or text messages such as IRS tax checks, especially requiring you to provide bank account information or request money transfers, don’t pay attention, those are frauds.

What if the tax is checked?

IRS will handle audit tax by email or interview, and the notification email will give you detailed instructions on what you need to do. Most people only need to mail back the certification materials required by the IRS. If the interview is required, the location will usually be located in the IRS office (office audit), or the taxpayer’s home, company or field accountant (field audit).

Matters needing attention in response to tax inspection:

Don’t worry: Just respond to the IRS in a timely manner, and don’t rush to fix it right away. Give yourself more time to sort out all the required documents.

Only the documents required by the IRS: IRS will list the supporting documents you need to submit in detail, prepare all the required documents, and do not add more documents to other documents.

Only submit copies of documents: Keep the originals yourself, just submit the copies, otherwise it will be more troublesome if the IRS loses your originals.

Make a list of the submitted files.

Be honest and short in answering questions: ask what to answer, don’t lie, but don’t gossip too much, because tax inspectors are very experienced and are likely to find other questions from unrelated words. If you can’t answer the question, you can record it and explain to the examiner before replying.

Keep calm: the tax inspector is only doing his job in tax checking, not to trouble you, as long as he provides the proof they need without disputes.

If necessary, you can ask a tax professional to handle it on your behalf. If you are not sure about the tax investigation response and you are worried about saying the wrong thing, you can hire a professional accountant, lawyer and other professionals to help you review the document and answer the question; if you want to sign the document, Be sure to ask a professional to help you see and sign again if you think there is no problem. All signed documents must be kept in a copy.

Tax inspection results

After IRS tax inspection, there will be the following three results:

No change: IRS finally thinks that your tax return is no problem.

Agreed: The IRS is doing a Tax Check and  thinks that your tax return has problems and needs to be changed; you find that you made a mistake and agree to accept it. For example, if the IRS requires a tax compensation penalty, you should just sign the document and pay the tax.