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The top five legal things you need to know about being audited

No one wants to be audited. And while your chances of being audited by the IRS are pretty slim (only about one percent of Americans are audited each year), it still helps to know how to avoid audits and, in the event that you are audited, you know your legal rights.

What are the chances of being audited?

While some audits are entirely random, meaning there are no discrepancies in your paperwork and you were chosen at random, some of them are the result of things that don't add up or don't make sense in your claim. These are a few things that are said to increase your chances of being audited:

- You reported information that does not match the information the IRS has received on various forms from your employers, banks, brokers, and so forth.
- You reported complicated transactions related to your investments without providing clear explanations for them.
- You've been audited before, and these previous audits have resulted in sizable tax deficiencies.
- The information on your forms is incorrect, missing, or doesn't match the rest of the information in your files.
- You've made a number of mathematical errors on your forms, so your numbers are off.

Chances are you won't be audited unless there is something questionable about your tax returns. However, in the event you do get audited, you should be aware of your legal rights with regards to what you can and can't expect and how to appeal the final assessment of the audit. The following are the top five legal things you need to know about being audited:

1. Legally, you have a minimum of thirty days from the date you receive the request in the mail to respond to the request for additional information. In addition, if you have good reason, you can send a written application for additional time (usually about 30 days) to get the requests in.
2. You don't necessarily need to be present at the audit. You can actually authorize your attorney, accountant, enrolled agent, or anyone else who is recognized to practice before the IRS to represent you at the audit.
3. You must be notified in writing that you are being audited. This info should contain the legal basis for your audit as well as the time period in question and the amount of underpayment you are being assessed for.
4. Your information is confidential. By law, the information regarding your taxes and financial information will be held confidential during the audit. This includes any information the Department has requested and guarantees the information will only be used for official purposes.
5. You can appeal. The taxpayer has a right to appeal the assessment that the Department of Finance makes. You have 90 days to file a written petition for reassessment. This petition should contain the taxpayer's name, address, and phone number; account or social security number; a copy of the assessment notice you were given by the Department of Finance; a detailed explanation of why you disagree with the assessment and any supporting documentation; and your signature.

In the event that you are facing an audit, there are a number of things legally you should be aware of. The above are the top five things you should know. Be sure to look at the IRS' website as well for complete information regarding your audit.

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