Last year, the IRS flagged 3.8 out of every 1000 tax returns for an audit. Although this number is small in the grand scheme of things, it’s still crucial to understand why audits occur and how to handle one should you be audited.
What is a tax audit?
According to the IRS, a tax audit is a review/examination of an organization’s or individual’s accounts and financial information to ensure information is reported correctly according to the tax laws and to verify the reported amount of tax is correct.
Why do tax audits in Texas happen?
Tax audits can happen for a variety of reasons, but most of them fall into two categories. The first one is that your return was randomly selected by a statistic formula the IRS uses to create a “norm” of what format most returns should follow. Second, your tax return may have been selected for an audit because of a variable that was flagged with previous tax returns that were also flagged.
Some reasons your tax return may get flagged for an audit are:
- Not reporting all your income
- Errors (Spelling mistakes, missing information, etc.)
- Issues complying with offshore bank accounts.
- Inflated charitable contributions.
- Home office deductions.
While the options above are not the only reason you can get audited, they are commonly seen by auditors and legal professionals.
Less than 1% of households are selected for a tax audit every year. However, that’s still around 1.2 million U.S. households. Some reasons you can get audited are; cash based businesses, home office deductions, financial accounts outside of the U.S., digital asset transactions. If you get audited, there’s no need to fear! Just remember; you have rights, it’s not as intimidating as it seems, and you can retain an attorney to represent you through Texas Legal’s Online Attorney Finder!
What to do if you get audited in Texas
If you find yourself in a situation where you’re being audited, there’s no need to panic! Here is a breakdown of the simplest yet most effective way to navigate an audit. First, it is important to understand your rights as a taxpayer.
Your rights as a taxpayer during an IRS audit
According to the IRS, these are some of your rights as a taxpayer in case you get audited:
- A right to professional and courteous treatment by IRS employees.
- A right to privacy and confidentiality about tax matters.
- A right to know why the IRS is asking for information, how the IRS will use it, and what will happen if the requested information is not provided.
- A right to representation by oneself or an authorized representative.
- A right to appeal disagreements, both within the IRS and before the courts.
For a more detailed understanding of your full taxpayer rights, refer to this pdf from the IRS.
While you are likely able to handle a tax audit independently, engaging a legal professional to represent you through the process is the simplest and least stressful way to navigate an audit.
Legal representation costs for tax audits in Texas can be high and range anywhere from $1,000 to $3,500; however, Texas Legal significantly reduces this expense with an affordable annual or monthly premium to all of their members. Texas Legal is a nonprofit organization that makes legal representation accessible to all Texans facing an audit, ensuring they get the protection and representation they deserve.
Affordable tax audit representation through Texas Legal
Your Texas Legal plan provides coverage for attorney costs during a tax audit and a wide range of other legal services. These services include but are not limited to criminal law, family law, and estate planning.
As a bonus, when you enroll in a Texas Legal plan, you’ll have access to Balance Pro‘s financial fitness services, which will help you stay informed about financial matters, such as your taxes! Your Texas Legal plan benefits not only ensure you understand taxes correctly, but also offer you peace of mind and protection in the situation of a tax audit.
Become a member today!
If you are looking to receive legal protection at an affordable cost in a variety of legal services, contact us today! Protect yourself from life’s unexpected events with Texas Legal by your side.
To understand more about what Texas Legal covers, review our plan benefits, and if you’re ready to receive legal protection, feel free to contact us or sign up for coverage today.
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