Responding To The IRS Audit Letter
Almost half of all IRS tax audits originate with your receipt of an official IRS taxpayer letter requesting that you provide additional information concerning your tax return and supply the IRS with further supporting documentation.
There is no need to panic at this point – but you should proceed cautiously. Therefore, it is highly recommended that you retain an experienced tax professional to represent you directly with the IRS.
Sometimes the IRS will ask for further clarification regarding a part of the return, and sometimes the auditor will ask for your complete tax return, even including past years.
Your right to dispute their claims
If you are unlucky enough to be audited, remember you will have the opportunity to dispute their findings. However, suppose you know you probably do owe unpaid tax. In that case, it is not advisable to challenge their result just because you are being audited.
It is unwise to use the audit process as a way of fighting collection rather than just by respectfully acknowledging the underpayment and having your representative negotiate the best possible repayment terms you can. It is best not to wake a sleeping giant.
The last thing you want is for the auditor or the auditor’s local field office to think you are dishonest with them. If you are, expect them to make your life very difficult, and they can do it.
Dealing With The Tax Auditor
Here are a few tips for dealing with the tax auditor:
- Do not ignore their letters or phone calls. Contact the IRS as soon as you receive their audit letter and inform them that you will contact your tax preparer immediately and get back to them as quickly as possible. This way, the IRS knows that you are cooperating with their investigation.
- Never give IRS auditors false or misleading tax information. Also, make sure you are current on your past year’s taxes since it is IRS policy not to negotiate with anyone unless they are current on their back taxes.
- File your tax return even if you believe you won’t owe taxes. Some taxpayers are under the false impression that if they do not file a tax return, somehow, there will be nothing for the IRS to assess. This would be a mistake since the failure to file a tax return for most people is a misdemeanor.
- Be responsive to IRS Requests – don’t delay.
Retain a tax expert to represent you
As soon as you receive an IRS tax audit notification, you should immediately contact the tax advisor who prepared your tax return. Your tax adviser should explain the IRS tax audit process and assist you in preparing for the tax audit. However, there may be better people to represent you at the audit than the person who prepared your tax return.
Be selective and retain an experienced audit professional you can. Remember, tax audits can be dangerous matters and have the potential to carry criminal consequences.
Former IRS tax officials are not always your best choice
It is in your best interest to find the right tax professional, preferably someone with more than three years of experience defending IRS audits. Some experts believe that retaining a tax professional the IRS has previously employed as an auditor should be your best choice. This is only sometimes true. You will need to decide on your own so perform your due diligence. Check the internet for favorable and unfavorable reviews
IRS time barred from collecting back taxes
The IRS has up to ten years to collect back taxes beginning from when the IRS initially assessed the tax debt. However, several circumstances can extend that ten-year limitations period, such as your declaring bankruptcy or filing an offer-in-compromise.
There are also circumstances in which the IRS has been known to make mistakes, such as sending out their assessment notification to the wrong address causing substantial delays in their collection process. Be sure however, to file a change in address with the post office. Otherwise, the IRS might assume you have been evading them.
Finally, most taxpayers actually end up owing the IRS some money after an audit. If you are unhappy with the audit findings, you still have the legal right to appeal your case to the IRS appeals office.
