Correspondence from the IRS that they plan to audit your taxes could cause uncertainty and angst. Knowing some of the reasons why they might do this can help you prepare a defense.
The good news is, even if the IRS finds something concerning, you can eventually remedy the situation so you can regain good standing.
Not reporting your income
The IRS requires you to report all taxable income. If you leave portions of your income out or fail to include some altogether, you could raise suspicions. A tax audit will allow officials to review your records and identify where your income is and whether you have accurately reported everything.
Making simple math errors
A simple math error could also raise flags and cause the IRS to want to take a deeper look at your report. However, according to the IRS, sometimes random selection based on a statistical formula, certain reports to go through an audit even if nothing is amiss. When you receive correspondence about an audit, you will also receive an explanation of why the IRS wants to look at your report.
Deducting too many expenses
If you write off too many expenses on your tax report, the IRS might have suspicions about whether everything qualifies. When writing off expenses, particularly business expenses, make sure to use common sense and not make far-fetched claims.
A tax audit is not the end of the world. With help from those you trust, you might be able to propose a solid defense so you can avoid or mitigate the repercussions.