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How to prepare for a tax audit

Maryland residents may be in the process of collecting information to complete their tax returns. Ideally, an individual will take as many deductions and credits as possible. However, it is also important to understand what happens if the IRS decides to audit a return. In an average year less than 1 percent of returns are selected for further scrutiny. In 2017, there were slightly more than 3,000 criminal cases according to an annual report from the Criminal Investigation Division.

Reducing the odds of an IRS audit

The odds of a Maryland resident being audited are relatively low. According to the IRS, only .7 percent of returns were selected for review in 2015. However, there are steps that one could take to help further reduce the risk of coming under IRS scrutiny. It is important to note that there is no way to eliminate the risk of an audit as some returns are selected randomly for review.

Common reasons for audits

A majority of taxpayers in Maryland and the rest of the country normally do not have to go through an audit. However, there are certain issues on a tax return that may compel the Internal Revenue Service to take a second look.

Avoiding small business tax audits

The last thing that a small business owner in Maryland wants is a tax audit. While the chances of being audited by the IRS are relatively small, this fact is cold comfort to an entrepreneur who is faced with an investigation. Fortunately, there are several things that business owners can do to prevent IRS scrutiny.

Understanding the risk of audits

In Maryland, some taxpayers are audited every year. While some people may believe that they do not need to worry about being audited, it is important for them to realize that the Internal Revenue Service can audit anyone that it chooses.

Failures to file and paying taxes late: What to know

In Maryland, some taxpayers may either fail to file their tax returns by the filing deadline or they may fail to pay all of the taxes that they owe when they are due. Failures to file and failures to pay may both result in penalties in addition to the balances that may be owed.

Progressives were also targeted by IRS in Tea Party scandal

Maryland residents may recall the controversy surrounding conservative groups that may have received extra scrutiny from the IRS. However, other groups had also drawn scrutiny from the IRS as well. An audit revealed that groups seeking tax-exempt status with words such as progressive in them were also given looked at harder. The audit was conducted by the Treasury inspector general for tax administration after a bipartisan group in the Senate asked for it.

When disaster strikes

People living in Maryland know the importance of being prepared for natural and man-made disasters. Despite one's best efforts, however, there is still often a flurry of activity as individuals and families attempt to reestablish their lives after life-changing devastation. One area that can become particularly challenging is the reconstruction of tax and financial records to prove losses.

Questions about new IRS rules for partnership audits

New rules for audits contained in the Bipartisan Budget Act of 2015 will become effective on Jan. 1, 2018, but officials at the Internal Revenue Service acknowledge that procedural questions still need to be settled. Business partnerships in Maryland therefore could face uncertainty in the face of an audit because of insufficient guidance about the appeals process or push-out elections to transfer tax liabilities to specific partners.

New IRS rules aimed at partnership audits

Maryland businesses that operate as partnerships or as limited liability companies will face new IRS rules starting with all tax years commencing on or after Jan. 1, 2018. In some cases, this may require changes to an existing partnership or member agreement. It may also require partners to communicate better in general to avoid potential consequences. One of the goals of the new auditing rules is to simplify the role of the IRS in conducting audits as well as to level the playing field between corporations and large partnerships.

Contact the Tax Lawyers at Kundra & Associates

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