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IRS Audit Risk is Increasing in 2020: What You Need to Know
For years the Internal Revenue Service has been cutting back on audits due to a multitude of economic and technological reasons. And for a long time, the average taxpayer has been more than happy to live with that. But that is about to change.
It may come as a surprise, but for a very long time, the IRS has been reducing the number of tax audits it conducts. For example, compared to the year 2010, audits on individual tax returns in 2018 had dropped over 40%.
The reasons for this dramatic decrease are varied and include budget cuts, reduced personnel, outdated processing systems, and an increase in e-filing. Basically, the IRS was being forced to do more with less.
But now the Internal Revenue Service is preparing for a big comeback, with more money and manpower than they have had in years. This means the IRS will increase staff to handle tax returns with more efficiency and accuracy. It means they will update their computer systems to handle a larger number of tax returns with greater speed and precision. And finally - and most importantly - it means they will have more resources to pursue those who do not claim all their income or file a return at all.
Which means that more audits ARE on the way. No doubt about it.
You can help protect yourself from even the possibility of an audit by being proactive. In the coming tax season keep your records, receipts, and any government documents well organized. If you prepare your own taxes, take a step back, then go over everything again. If you use a tax professional, make sure you are able to answer any questions and can clear up any uncertainties with solid facts and figures. Ask your tax pro questions if you are not sure of something or how your bottom line was calculated. You are signing the return as true and accurate, so be sure you agree.
If you do get caught up in the wave of new audits, you may want to check out these helpful hints on handling the situation.
Remember, the IRS is about to receive more financial and governmental support than it has in a long time - and that means more audits for those not following the tax laws. But if you do not give the IRS a reason to be especially interested in your tax return, odds are they won't be.
About the Author
Mark Steber is Senior Vice President and Chief Tax Information Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.
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