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<br>Tax audits are never fun, and while theyu2019re not designed to be, they also donu2019t need to be super stressful. By understanding the differences between federal and state tax audits, seeking help from professional tax preparers, and not panicking, you can get through the audit process with minimal stress and fuss.
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Understanding The Differences Between Federal & State Tax Audits
Tax audits are never fun, and while they’re not designed to be, they also don’t need to be super stressful. By understanding the differences between federal and state tax audits, seeking help from professional tax preparers, and not panicking, you can get through the audit process with minimal stress and fuss. In the U.S., tax audits can be carried out at federal and state levels, with both levels having processes, regulations and consequences that are unique to them. Understanding the differences between a tax audit carried out at federal level, and one carried out at state level, is important if you’ve been selected for one, so that you can prepare properly and remain complaint. Working with a service providing tax preparation in Coral Gables is one of the most effective ways to achieve this.
Let’s take a closer look at federal and state tax audits and their differences: Federal tax audits Conducted by the IRS, these are usually triggered by tax return discrepancies, unreported income, or deductions that look suspicious; they may also be carried out at random. Here are the main features of a federal tax audit: Initiation and notification You would be notified about an audit by the IRS through the mail.
Audit types • Correspondence: for minor discrepancies, an audit may be carried out via mail • Office: to provide clarification, taxpayers must visit an IRS office in person • Field: for those with more complex financial circumstances, agents from the IRS carry out the audit at the individuals home or business Scope of review Deductions, credits, income and tax liabilities are likely to be studied in detail. Outcome of the audit
Adjustments to taxed owed may be made following the audit, penalties might be issued for fraud or underpayment, or there may be no changes. Appeals and resolution It’s not unheard of for an individual to disagree with what the IRS found during an audit, and when this happens, they are given the opportunity to appeal or take legal action. State tax audits
Every state has their own agency that carries out tax audits, and these are usually focused on tax regulations that are specific to the state, issues surrounding residency, and compliance with sales tax. Here are the main features of a state tax audit: Triggers Residency disputes, payroll tax or federal and state tax return discrepancies may trigger a state tax audit. Rules specific to jurisdictions State audits can vary hugely with each state having its own tax codes to follow.
Audit types • Income tax: checks and validates income tax as filed by both individuals and businesses • Sales tax: makes sure that the collecting and remitting of tax amounts is correct for businesses • Use tax: ensures that out-of-state purchases comply with tax laws Audit process In much the same way as a federal audit, a state audit will require certain information to be provided, certain documents to be reviewed, and tax authority meetings.
Consequences and penalties While serious cases may warrant legal action, in many instances, fines and unpaid tax interest are imposed. The importance of seeking professional help during any kind of tax audit Having expert guidance from tax planning in Coral Gables can help ensure that all of the relevant documents and information are provided to the relevant authorities in a timely fashion, and that the entire process goes as smoothly as possible.
Being subject to a state or federal tax audit as an individual or business owner, can be a time of great worry and even fear. But, with a tax professional to guide you through the process, you can alleviate your concerns and even take the relevant steps to prevent being targeted for one in the future.