You already know that each tax situation is as unique and complicated as the taxpayer filing the tax return, therefore, the answer to the question, do you get your tax refund if you get audited can’t resemble one-size-fits-all. Even after receiving the amount, the Internal Revenue Service (IRS) has the authority to audit the tax returns.
On the other hand, the amount of tax refund that you are expecting from the IRS might be reduced or obliterated if you’ve mistakenly made an error. Depending on the mistake, you might end up owing the IRS instead of money retrieval.
The statute of limitations, a law that sets the length of time in which the parties to a potential lawsuit can initiate legal action before the question in dispute is considered too old to be litigated, suggests that the IRS can audit tax returns filed within the previous three years.
Click here to know what happens if you get audited and don’t have receipts.
How does the IRS Conduct an Audit?
There are three ways through which you can learn about do you get your tax refund if you get audited because the IRS conducts a tax audit to ensure your magnitude of implementation towards it.
1. Correspondence Audit
Also referred to as Campus Examination, an IRS correspondence audit represents more than half of the taxation investigation of the commissions. This type of audit is typical for non-profit organizations and philanthropic companies. It is done via mail and provides quick solutions to the problems of taxpayers through mail or telephone calls.
2. Office Audit
These types of audits are face-to-face meetings where the taxpayers visit the IRS, where a swift response is crucial to attaining quick results. Complicated taxation issues of small businesses or non-business returns regarding itemized deductions, business revenue, rental income, and related expenses are resolved in an office audit.
3. Field Audit
A field audit is a type that seems like a nightmare to many taxpayers because it involves in-person meetings with the IRS auditors or agents at either the residence of taxpayers, the representative office of the company, or the place of business. It is also known as field examination because all your revenue records are demanded. In addition, you can also be interrogated outside the premises of those records but within taxation limits, involving the tax consulting services you’ve ever availed of.
The Criterion for Audit Selection
Tax returns can be selected for an audit regardless of the issuance of a tax refund to the taxpayer.
For the following two reasons, these returns are selected for audits:
1. Randomized Screening
Some of the returns are selected based on a statistical formulation. The returns of the taxpayer are compared against the typical norms for similar cases. If it is notably different or stands out as an outlier, the return may get audited.
2. Relevant Examination
If issues or transactions with other taxpayers are involved, the IRS may select a return for audit purposes, such as that of business partners or investors.
Guide: Do You Get Your Tax Refund If You Get Audited?
If you’re searching for an answer to do you get your tax refund if you get audited, there’s a possibility of the occurrence of two scenarios – you either receive the tax refund and then get audited or get audited before retrieving the amount. Or your worst nightmare may come true – you may end up failing an audit as well as losing the taxation refund amount.
This failure turns the tables upside down when the IRS charges hefty amounts on taxes, which are not free of interest at all, making you owe to the IRS more than you could imagine.
You don’t have to worry because this failure isn’t going to put you behind bars. If you can’t afford these charges, the IRS offers the facilitation of payment plans with which you can pay in easy installments.
Audit Failure – Will You End Up in Jail?
You’ll never end up in jail whether you receive the tax refunds or fail an audit. However, it could set up a chain of events that may land you in prison, but it is too rare to occur unless the provided evidence is beyond a reasonable doubt or you’re convicted of tax evasion or fraud.
In such situations, the IRS presents your case to the respective Department of Justice, which will decide whether it is worth pursuing. The Justice Department will only chase your case if there’s visible evidence of taxation law infringement. Unless someone’s trying his best to lure you into a trap or conspire badly against you, there are negligible chances of such events occurring.
Triggering Factors to Taxation Audit
Some returns that have willingly or unwillingly demonstrated any of the following might be a trigger for the IRS to audit your tax returns.
1. Self-Employment
Many self-employed persons might be puzzled about do you get tax refund if you get audited because of the irregularity in their monthly income. The IRS may wish to verify your tax report if there are huge fluctuations between your earnings and losses.
2. Deductions
It seems that some deductions may help to reduce the taxable amount, but unusually high subtraction, for which you’re not entitled, may prompt the IRS to review your return.
3. Excessive Income
Earning a usually high income via illegitimate means is a trigger to the official regulatory body, particularly when you’re working as an independent contractor or are involved in gambling or lottery winnings.
Final Thoughts
Navigating your way to do you get your tax refund if you get audited requires professional help from tax experts so as to save you from failing audit sessions even if you’ve received the tax returns or not. It would be best to respond to the IRS, which requires relevant documentation and information to resolve the issues as quickly as possible.