The IRS conducts audits for a variety of reasons. Some are random, while others may be triggered by something suspicious in the tax return or by a taxpayer’s lack of response to previous correspondence from the IRS.
Many audits are also part of the limited IRS compliance efforts conducted to make sure that the tax system is working for all Americans.
If you’re dreading an IRS audit letter, know that you’re not alone. According to the IRS, more than 770,000 tax returns were audited in the 2019 fiscal year.
With over 140 million personal income tax returns filed each year, it’s safe to assume that the majority of people will not be audited. However, those who do receive an audit notification aren’t always in danger of expensive fees or incriminating violations.
Receiving the IRS Letter
The audit process always starts with a letter in the mail. The IRS may contact you by phone or e-mail after you’ve established initial contact, but a letter in the mail is your only official way of initial correspondence with any type of audit.
This letter will normally explain why the audit is taking place and which tax year it is for. For the taxpayer’s benefit, the notice should also include instructions on how to finish the audit or dispute its results.
Understanding the Type of Audit You Received
There are tens of thousands of people randomly chosen for an audit yearly. Since there are various types of audits, most of them aren’t as serious as having an IRS agent show up in your place for a field audit. Contrary to popular belief, most audits are simply an exercise in fixing mistakes or inaccuracies on your tax returns.
Keeping Your Anxiety at Bay
The majority of audits may be completed quickly. You should have 30 days to reply to the audit notice, which should give you enough time to evaluate your return and speak with a tax professional.
The majority of audits are the result of math errors or an automatic reporting system that compares tax information from employers, banks, brokerage firms, and other sources to what people report.
An audit can also be triggered if there is a mismatch between taxpayer income and deductions filed on paperwork from third parties and the income tax amounts reported by taxpayers on individual income tax returns.
Other causes for receiving an IRS audit letter include a request for an explanation of your tax status for income from employee stock options, itemized deductions, passive and non-passive rental property income, and short- and long-term capital gains.
Responding to Your IRS Audit Notice
Ignoring the letter or pretending you didn’t get it won’t benefit you in any way. Moreover, you usually have 30 days to react to a letter that has a “respond by” date on it. Remember, your response should be 30 days from the date printed on the letter, not 30 days from the date you opened it.
If you don’t respond, you risk accruing additional interest on an already-due payment, penalty costs, and further fees. If you disagree, you may lose your right to appeal the claim. If the IRS alleges you owe unpaid taxes and you ignore the letter or fail to answer before the deadline, your property may be subject to liens and levies.
After receiving your audit notice, you have time to contact and engage with a tax professional to dispute the letter. You also have ample time to appeal any claims they’ve made, work out a payment plan, or tax settlement for unpaid taxes.
Call a reputable tax resolution company immediately for professional assistance with your tax debt. No matter what most people might say about the IRS, there is a way to get out of an issued tax obligation.
Federal tax debt may be a source of worry which you feel you have no control over, but the IRS offers tax relief options to help you manage your burden. There are also methods available to completely eliminate tax debts. This is why it never hurts to visit a tax professional at this point to obtain a better grasp of what the IRS is looking for.
You can rely on Axiom Tax Resolution Group for tax relief solutions in Birmingham. We are trusted tax professionals who are ready to find a permanent solution to your tax problems with the IRS. Book an appointment with us today!