There can be a very few things more upsetting than receiving an IRS tax audit notice, especially when you have been filing your taxes on time. The IRS has the authority to audit returns within 3 years from the date of filing, but that does not mean you cannot receive a ‘letter bomb’ after that period. The IRS conducts tax audits to ensure taxpayers are accurately filing returns, and any inaccuracies or purposeful mis-reportings can lead to heavy penalties. To avoid errors and comply with tax filing regulations, consider seeking the help of a tax attorney offering tax advice and tax filing consultation services. If, however, even after taking necessary precautions you receive an audit report, do not panic, for help is here. Read on.
Act Swiftly to Respond
In the first step of the audit, the IRS will seek more info about your income, deductions and donations. Follow the instructions and mail all the documents along with required evidences. For example, photographs that show you use your office strictly for work. If you find you owe back taxes, write a check to the IRS immediately as any delay would increase the interest burden. If everything goes smoothly, your nightmare will be short lived, however, if you receive a second notice, you need to be battle ready.
Find Out the Reason of an Audit
After receiving the second audit letter, the first thing you must do is learn about the reason of audit. Some of the most common ones include:
- When 1099, W-2, cash wages and other forms do not match reporting. Inaccurate deductions also provide enough ground to the IRS to opt for an audit.
- When the taxpayer’s report shows transaction with a person whose returns are audited.
- More than usual withholding
- Random selection (believe it or not!)
Every correspondence by IRS has a notice number displayed on the upper-right corner of the letter. The number also appears on the lower left hand side of the tear-off stub. After you locate the notice number, log into IRS official website where you will find a table explaining what each notice number means. To learn about the reason why your returns are audited, match your letter number with that in the table.
Know Your Audit Type
Knowing your audit type is important to determine the documents you need, where you must send them and whether you need a tax attorney. Different types of tax audits are:
- Correspondence Audit: The IRS conducts this audit to examine a part of your return and may ask you to mail receipts, checks and any other document related to the part.
- Field Audit: An in-field auditor visits your office or house to conduct an audit.
- Office Audit: IRS will ask you to report to its local office with a list of documents.
- Taxpayer Compliance Measurement Program Audit: The most comprehensive among the audit types, this audit involves studying all the aspects of your return.
Collect Important Documents
Collect important documents such as salary stubs, donation slips and marriage and birth certificate. Never mail the original documents or the only copy. Never send more documents or share more info than requested. If you cannot find the original documents, request the IRS to give you some time to arrange for the duplicates. When audited by an in-field agent, arrange all your documents in a file.
Get Professional Help
An IRS tax audit notice is not the end of the world. After you receive the letter, stay calm and follow the above tips. If you receive the second notice, contact the person who prepared your return and request them to look into the matter. It is also highly advisable that your tax attorney be present during an in-person audit or a TCMP audit. If you are in Dallas or any nearby area and need professional tax filing consultation, the tax attorneys at the Law Offices of Nick Nemeth can help. Let us know your issue by filling out our contact form and we will take it from there.