While most Maryland residents may be nervous about an IRS audit, the chances of actually being audited are relatively low. Only 1 percent of those who make under $200,000 will have their returns examined. Of those who make more than $1 million, roughly 12 percent can expect to have their returns examined. It is also important to know that no single deduction is guaranteed to trigger an audit.
Therefore, individuals can feel free to take any legitimate deductions that they have. As a general rule, returns are more likely to be flagged by a computer if something on them doesn’t fit an expected range based on a person’s income. However, a return will be checked by a person to see if a large deduction or other abnormality is reasonable within the overall context of the return. Taxpayers should know that an audit doesn’t necessarily mean meeting with an IRS representative.
Instead, a person could receive a letter asking for more information about a deduction or about income reported on a return. Providing that information could put an end to the matter. In some cases, returns are selected for audit to create a financial profile of various tax brackets. This may also be a situation in which sending documentation requested by the IRS ends an audit quickly and easily.
Those who receive an income tax audit should review it carefully before taking action. It may be a good idea to show the audit to an accountant and attorney prior to responding. Legal counsel may be able to engage with the IRS in a manner that can keep the investigation focused and completed in a timely manner. In some cases, taxpayers may be entitled to a refund or owe no additional tax after an audit is completed.