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Posts Tagged ‘Financial Statements’

The Complete Guide to Tax Audit

Friday, May 13th, 2011

Audit is the process of manually reviewing or evaluation of a person, company or specific project, especially their financial statements. It is a process that scrutinizes most financial details that belong to a person. If you have never heard of audit before, then you do not even know how to calculate your taxes yet. The process of being audited itself creates a lot of fear in people. For most, they juts do not like the feeling of being exposed and checked for everything, especially financial matters. Some people even report feeling blamed and accused somehow. Most of the time, it is just the emotional side that is getting the better of us. An audit might be scary for some but is an essential process. There are a few reasons. The first reason might be your tax information. For example, you report your tax information for your business or company. Somehow, there is an error. Whether the mistake is made by you or the ‘IRS’, we do not know for sure.

You should be afraid of audits that ask you to schlep to the local ‘IRS’ office. Most likely, for this example, 20% of such audited returns are left unchanged by the audits. This means, you as the tax payer do not owe more money. For some, they are lucky. They can get a refund because the audit uncovered some mistakes in the report. The bad news is, you will most likely find that you owe money to the tax department after an auditing process. This is the major reason why people do not like being audited. Chances are, you are more likely to be found guilty of not paying some of the taxes to the government. There is more to the “disadvantage” of an audit process. If you are the unlucky majority, you can even end up paying much more. How can this happen? The amount of additional tax that you we in interest and penalties depends on how your audit goes. With this being said, there are no sure ways to survive an audit process. Again, most people do not like going through an audit for this very reason. Somehow, they would have to pay extra amount of money to the taxes..