In situations like this, you need a bona fide tax expert to light the way through the scary forest of confusion and doubt. Moreover, state tax examiners tend to be more vigilant when probing for unreported or self-employment income, and they generally won’t accept anything but full substantiation on claimed expenses. State tax law doesn’t always conform to federal treatment, meaning additional legal research is often required to verify the proper way to handle the audit. The bottom line is that state tax audits are some of the most challenging cases we work here at TaxAudit. This is largely due to a smaller workforce. Not only are many state tax agencies more aggressive, they also tend to operate much slower than the IRS. The only thing we can’t predict is the speed at which they do so. We’ll do everything we can to ensure the state tax authority releases the full amount of refund you are rightfully owed based on the established facts of your case and gives you the full benefit of your well-documented business expenses and personal income tax deductions. This is due to the increased likelihood a noncompliance penalty will be imposed on the erroneous refund claimed when funds are paid out.įortunately, having a pre-paid audit defense membership means you’ll get expert help navigating through a state audit of your EITC, income tax residency status, itemized deductions, or any other tax-related issue they choose to investigate. ![]() Despite their best intentions, this type of free tax advice from friends/family on who exactly qualifies as a dependent or what makes you qualified for the head of household can cause more harm than good. Unfortunately, many of the mistakes we see on self-prepared tax returns are caused by bad advice from people you would ordinarily trust. It’s up to you to prove your tax return was filed in accordance with the law, which means you’ll need to fully explain your personal/family living situation. In an EITC audit, the tax agency will generally freeze all or part of your refund before it goes out the door. Recent IRS reports suggest as many as 1 out of 4 EITC claims are paid in error. ![]() It’s hard to blame the IRS and state tax agencies. Tax returns claiming the EITC are some of the most heavily audited returns based on historically high noncompliance rates. Like the IRS, state tax agencies aggressively audit refundable tax credits such as the Earned Income Credit (EITC). Unlike the IRS, states send out audit letters quickly, sometimes within a matter of days from when the original tax return comes in the door. Moreover, a large percentage of the state audit defense cases we work involve tax returns for the current year. This makes it increasingly difficult to isolate what items are tax-deductible, and therefore defensible, if claimed as a tax write-off. Many people who have a small business don’t keep a separate business checking account and don’t log their business expenses in real-time. The examiner wants to see where all your money is coming from, where it is going, and how much commingling of funds is occurring. ![]() You’ll likely be asked to produce bank and credit card statements for your business and personal financial accounts for the entire period under audit, plus the preceding December and following January (i.e., fourteen consecutive months on a single-year audit). They will often conduct an extensive bank deposit analysis in search of unreported income. ![]() State examiners tend to focus on challenging issues such as residency/domicile. In my experience, state audits can be much more complex and in-depth than your typical IRS audit. Having the protection offered through your Audit Defense Membership Agreement essentially means that TaxAudit will represent you through the completion of any income tax audit (state or federal) for the tax return year identified on the membership certificate during the Period of Membership.īut if the real question is how being audited by the state differs from being audited by the IRS, the honest answer is – they are tougher than leather on a blistering hot Sunday afternoon! The short answer is “Yes.” TaxAudit is the exclusive provider of TurboTax Audit Defense.
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |