Few things in life are more nerve-wracking than an unplanned date with the IRS. When the Internal Revenue Service comes calling with demands for a tax audit, it is up to the taxpayer to answer and verify their information.
Mark Hauser is an experienced private equity investor from Cincinnati with decades of experience in the industry. Mark Hauser, a financial expert and multi-industry professional, outlined some key ways he helps his clients prepare for potential tax audits.
As you’ll soon find out, some preparation can alleviate a significant burden.
What Does an IRS Audit Mean?
Mark Hauser points out that the Internal Revenue Service looks at an audit to bridge the gap between taxes owed and taxes paid. Individuals will receive a letter from the IRS notifying them of the decision to audit their information. Hauser notes that taxpayers typically have 30 days to reply, though he advises answering as soon as possible.
Mark Hauser notes that the IRS will traditionally select tax returns filed within the past two years, though more significant errors may give a reason for the IRS to dig into even older returns.
What Causes a Tax Audit?
According to financial equity expert Mark Hauser, the reason for a tax audit can change from one situation to the next. Hauser outlines several reasons for a potential tax audit to land at your door.
- Math and Rounding Errors – The IRS doesn’t appreciate simple math errors, which is one reason for an audit. Careless tax prep officials can lead to an audit.
- Unusual Donations – The IRS pays careful attention to donations and deductions, noticing when the gift is higher than the individual’s typical amount.
- Schedule C Losses – A high level of Schedule C losses can lead the IRS to look closely at a company to understand how the business is still operating.
- Failure to Report – According to Mark Hauser, the most common cause of an IRS audit is a failure to report income.
Preparing for an IRS Audit With Mark Hauser
An audit shouldn’t be taken lightly, and the assistance of a professional can help throughout the process. An attorney, CPA, or IRS Enrolled Agent can accompany the taxpayer during the audit. The length of the audit will depend on its complexity, the ease of availability regarding requested documents, and the availability of the individuals involved in the meetings.
Mark Hauser suggests that good preparation is the key to success. Learn more about private equity and IRS audits today!