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Run a cash-heavy business If your business typically deals with a lot of cash, you're more likely to be audited. The IRS has found a tendency among cash-business owners to ?forget? to declare some cash income that might otherwise be reported, and targets these businesses more aggressively.
Under New York's Tax Law, there is generally a three-year statute of limitations on tax audits, though in some cases (such as when fraud exists or when a substantial understatement has been made on an income tax return), the statute of limitations can last for as long as six years.
A Kovel agreement typically states that the workpapers created by the CPA firm belong to the attorney in order to maintain privilege.
Form 12661 is a form that taxpayers can use to request an audit reconsideration for a return or claim that has already been audited. The IRS will review the taxpayer's claim and the evidence provided by the taxpayer, and if it agrees, it will issue a letter of determination.
Misreporting data, math mistakes, incomplete state tax forms, excessive deductions, and failing to file your state tax return on time are some more common reasons for state audits.
Many taxpayers are randomly selected for an audit. Alternatively, you may be chosen if you reported income and/or deductions that are unusual when compared to similar returns.
Your communications with your attorney are generally protected by attorney-client privilege, meaning that their knowledge cannot be used against you in your case. Accountants, however, don't have the benefit of such a privilege ? not by default, at least.
Some of the reasons we select a taxpayer for audit include: Failure to file a return. Failure to report income or sales. Excessive credits or exclusions claimed on a return.