When Do You Really Need Audit Insurance
Let’s not be afraid of the IRS audit. Somehow, many people are gravely afraid of an audit and this fear can be unjustified. The IRS develops audit programs that are designed to monitor tax compliance issues of taxpayers. Does your income tax return suit one of these IRS audit issues? Will filing an extension reduce the possibility of having your tax returns selected for audit? You’ve got to read on and know how an audit insurance can protect you in time of IRS audit.
If you honestly file your income returns to the IRS, there really is no need to buy an audit insurance package. If you believe you have complied with what is really needed in tax returns, you don’t have to worry about audit issues. Every year, the IRS determines the areas for compliance and focuses more in choosing a sample of the returns for review. If you are audited, it doesn’t mean that you need to pay substantial tax bills with interest and penalties. The IRS is simply doing compliance check and reviews from your specific facts and circumstances. You may have an audit program that can end favourably to you.
For instance, you may be an employee receiving a W-2 from your employer. As a sideline, you are also doing artworks on t-shirts. The year in question had your business losing $5000 on form schedule C or the sole proprietorship return. This is what attracted the IRS attention. In previous years, you made money in your homebased part time business and paid income taxes and even self-employment taxes. The audit will be about a quick visit to the IRS to resolve the issue. It had no changes in the result. If you own a homebased business, you don’t need to be afraid with the IRS. You will just have to prove that the business is no longer making profit.
So learn to relax when you receive a letter from the IRS for audit. If you have an audit insurance, you can have a tax preparer or lawyer represent you for the issues that concern your business. They will represent you in times of need. However, you still need to be honest in filing your tax returns to avoid IRS audit.