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IRS Alters 2024 Audit Focus

The IRS enforces the tax law in several ways, but primarily through the examination of tax returns that are identified as having the highest potential for noncompliance. This identification is determined using risk-based scoring mechanisms, data driven algorithms, third party information, whistleblowers and information provided by the taxpayer. The objective of an examination is to determine if income, expenses, and credits are being reported accurately.

IRS employees conduct examinations or audits in one of two ways: by mail or in person. Certain individual non-business returns with low and medium adjusted gross income (AGI) can be handled effectively by correspondence audit, but all other returns selected for examination are better handled either as an in-office examination at the IRS or at the taxpayer’s place of business.

Do not confuse an IRS CP2000 Notice with an audit. An IRS CP2000 Notice is a frequent letter sent to taxpayers to inform them of discrepancies between the income reported on their tax return and the information received from third-party sources, such as employers or financial institutions. It proposes adjustments to the return and provides an opportunity for the taxpayer to agree with the changes or provide documentation to support their original filing.

The IRS recently announced it is capitalizing on the additional funding provided by the Inflation Reduction Act by giving more attention to wealthy individuals, partnerships and high-income earners, taxpayers that continue to utilize Foreign Bank accounts to avoid disclosure, and individuals with digital assets.

According to the IRS, you must have a gross AGI (including Social Security, retirement, investments and dividends) of more than $400,000 per year to qualify as a high-income earner.

Contact this office immediately should you receive an audit notice. Without a substantial knowledge of tax law and audit procedures you should think twice about handling an audit on your own.

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