KANSAS CITY, MO - (Marketwired) - 04/04/13 - The federal government estimates it has a $450 billion tax gap (the amount the IRS estimates is missed in tax collections). One way the government tries to close that gap is through IRS audits of those suspected of having underpaid. In 2011, 7.4 percent of taxpayers were contacted by the IRS about their returns, and the IRS collected $15 billion from audits. H&R Block (NYSE: HRB) advises that even with an atmosphere that includes more people being audited, taxpayers shouldn't be afraid to claim all the tax breaks to which they are entitled.
"The best defense against an audit is to report all income and claim only the tax deductions and credits you are due," said Kathy Pickering, executive director of The Tax Institute at H&R Block. "Often, the IRS may request additional information or paperwork. A timely response by the taxpayer could mean the difference between owing extra tax or being able to justify claiming the valuable tax break. That is why being able to substantiate what is on the tax return is very important, so be sure to keep organized financial records supporting those tax breaks."
The profile of a potential audit candidate has shifted from the rich to include people who make far more modest incomes. Of the more than 1.5 million audits conducted in 2011, 2 in 3 were of people who made $50,000 or less. Following are some common reasons the IRS contacts taxpayers:
While tax season is January through mid-April, audits are conducted year round. The IRS may contact a taxpayer as late as three years from the filing date. However, contact may be very soon after the return is filed if an item is flagged for some reason.
Taxpayers who get an audit notice in the mail should contact their tax professional immediately as delays could result in additional penalties and fees. Most audits are correspondence audits conducted via mail; resolving the matter may be as simple as sending supporting documentation to the IRS. In any case, it is important to respond to the notice promptly. If a face-to-face meeting is required, some taxpayers may elect to have their representative attend without them. In the end, if the taxpayer disagrees with the auditor's findings, the results of the audit may be appealed.
"Being prepared for an audit means understanding what is being asked of you, providing that information only and often getting professional help," Pickering said.
H&R Block's tax professionals prepare and sign their clients' tax returns, guaranteeing accuracy and the maximum refund. In-office preparation services include Second Look® reviews and Block Live(SM), the industry's only video tax preparation solution. H&R Block At Home™ gives do-it-yourself filers the expertise and guidance of The Tax Institute at H&R Block on their computers, iPads and smartphones. The new My H&R Block Account lets taxpayers upload receipts and other important tax season documents securely, to one place, year-round, for free. The company offers affordable financial products and services through H&R Block Bank, and keeps its offices open and tax conversation going with clients year-round via blogs, tweets and Facebook.
Regardless of who prepares tax returns, taxpayers are legally responsible for the contents. To find the nearest H&R Block office, visit www.hrblock.com or call 800-HRBLOCK.
H&R Block, Inc. (NYSE: HRB) is the world's largest tax services provider. More than 600 million tax returns have been prepared worldwide by and through H&R Block since 1955. In fiscal 2012, H&R Block had annual revenues of $2.9 billion with 25.6 million tax returns prepared worldwide. Tax return preparation services are provided in company-owned and franchise retail tax offices by approximately 90,000 professional tax preparers, and through H&R Block At Home™ digital products. H&R Block Bank provides affordable banking products and services. For more information, visit the H&R Block Online Press Center.
The Tax Institute at H&R Block is the go-to source for objective insights on federal and state tax laws affecting the individual. It provides nonpartisan information and analysis on the real world implications of tax policies and proposals to policymakers, journalists, experts and tax preparers. The Institute's experts include CPAs, Enrolled Agents, tax attorneys and former IRS agents. Building off more than 10 years of research and analysis from a specialized tax research group at H&R Block, the company launched The Tax Institute in 2007.
SOURCE H&R Block