I reported less income than I actually made, and the IRS has notified me of an audit.

I cut some big corners on my tax returns and have been notified by the IRS that my return is being audited.  What’s next?

You really need professional help here.  As a general rule, corners that are over 25% of the return filed are deemed fraudulent.  Maybe you can explain it away, but if it’s 25% or more, it’s going to get a determination of being fraudulently understated.  Here’s an example:

You file a return that says your income was $100.  The result of the audit finds that your income was $200.  This is a 100% increase.

Because your income increased by 100%, there is a very real chance that your initial filing may be determined to be fraudulent.  This is a VERY BIG DEAL in taxland!  You can be penalized anything from 100% of the taxes owed (in other words, now you owe TWICE the tax) all the way up to a long-term vacation in Club Fed.

Posted in Common Tax Situations and tagged .