What To Do If You Receive An IRS Audit Letter
The idea of a tax audit might be the sort of thing that causes you anxiety, fear, or panic. That is an understandable reaction because a tax audit can be long, involved, and complicated. A tax audit can end with you paying more money to the government or getting into trouble.
That’s why you need a tax attorney experienced in handling IRS tax audits to represent you.
However, in most cases, receiving an IRS audit letter in the mail means you are being asked to verify some basic information on your tax return. Such information might be related to your filing status, your dependents, any unreported income, or your itemized deductions.
An IRS audit letter is not a big deal if you told the truth in your tax filings. But it is imperative that you open it and respond.
If I received a letter from the IRS in the mail, what should I do first?
This might sound elementary, but the very first thing you must do if you received a letter from the IRS is open it. So many people are too afraid to open IRS mail. Efficient response and quick conclusion of the audit do matter to prevent scope creep or new issues being raised.
Can my accountant help me with my IRS audit letter?
The IRS audit letter will indicate which tax year or years the IRS is asking about. If you had a CPA or accountant file your taxes for those years, you should contact them to ask about the issue and have them review your tax return(s).
An experienced tax attorney can assess the auditor’s goals and strengths and weaknesses based on past experience or information from other practitioners. They also know certain types of expense deductions that are often the focus of auditors. They may review unquestioned areas of returns for refund or offsetting item opportunities. More importantly, an experienced tax attorney is aware of potential fraud issues, tax code, and case law supporting your position.
How will I know if my letter or notice from the IRS is about a tax audit?
If you receive a letter or notice from the IRS, it may not necessarily be a tax audit notice. An official IRS letter will arrive by certified mail and require your signature so the IRS can confirm you received it. Authentic IRS correspondence will also include your taxpayer ID number, form number, employee ID number, and contact information.
There are a few formats an IRS audit letter might take. It could be an IRS correspondence letter, a notice of audit meeting with an IRS official (Revenue Agent), or a letter known as a CP2000, which is sent when the IRS is proposing changes to your filed tax returns for certain tax years.
How will I be audited? Will the IRS come to my house or my office?
The short answer is that an IRS agent might come to your house or your office. It depends on how you are being audited. In any audit, the IRS will review your income and other financial information to decide whether you paid the appropriate amount of taxes.
Here are three ways you might be audited:
- Field Audit: A field audit is when an IRS agent visits your home or business to review your records. You will likely have a chance to collect your documents before the field audit.
- Office Audit: An IRS office audit will take place at a local IRS office. You will need to bring any evidence or documentation related to your audit.
- Correspondence Audit: This type of tax audit will happen in writing. All of the information you provide to the IRS will be written and shared in detail.
In some cases, the IRS will review your entire tax return as part of the audit. In other cases, the audit might focus on one specific element of your tax filing. You will likely have to provide extensive and detailed information about your income and deductions during the audit process.
An experienced IRS tax attorney like Sammy Kim, who has represented people in IRS tax audits and knows how to advocate for you, is essential to a successful audit.
What documentation do I need to send?
The documentation required in each case is different. It depends on the extent and scope of the audit and why you’re being audited. You might be asked for business travel logs, paperwork from legal cases, employment documents, loan agreements, medical records, receipts, appraisals and more. Sometimes, you may have to prove you are not connected to certain income that is linked to your Social Security number or EIN. Other times, you may need to correct duplicated reporting on the same income.
Be sure to read your audit letter carefully to understand exactly what you are required to submit.
If you don’t have all of the documents they are requesting, you will need to reach out to third parties, such as banks, charities and others to get any records they might have.
How do I write an IRS Audit Response Letter?
Here are some tips for writing an accurate and effective IRS Audit Response Letter. An experienced IRS tax attorney can write your letter for you to help you get through the audit process much more easily.
- What to include: Be sure to include your Tax ID number, your full name, your contact information, your employee ID, your business ID (if applicable), and the name of the IRS officer who is in charge of your case.
- What to address: Address every issue the IRS stated in the audit letter. Do not miss any issue that was raised.
- What to provide: Attach all related documentation to your letter.
- What to request: Request a time and date to meet and resolve the IRS’s findings.
While you can choose to write an IRS Audit Response Letter yourself, an experienced tax attorney has the knowledge, skills, and expertise to know what to say and how to say it to help resolve your IRS tax problem with less hassle and less stress. It is critical that your IRS audit response letter directly addresses the inquired issues in an organized fashion to speed up the review and resolution of your case.
After you send the letter and documentation, the IRS will review it and send you a response.
What will happen if I don’t respond to an IRS audit letter?
If you ignore your IRS audit letter, your IRS tax problems will only get worse. You must respond to your IRS audit letter within 30 days, either by phone, fax, or a mailed letter. If you do not respond on time, fail to respond at all, or provide an incomplete or incorrect response, the IRS will eventually disallow any unsupported deductions and assess additional taxes based on their proposed changes. Then, you will get a bill from the IRS for any additional amount they say you owe due to the confusion on your return. They will add penalties and interest, accrued starting on the filing date.
I’m very anxious about receiving an IRS audit letter. Will it help if I write multiple letters in response?
No, it is not recommended to reply to the IRS audit letter multiple times. It is very difficult for the IRS to ensure that all the letters you might send are connected to you and added to your file. This is especially true due to the backlog caused by the pandemic.
It is important that you get the help of a skilled tax attorney to write one single complete response to your IRS audit letter and know how to escalate the matter if the IRS does not agree with your position.
If you received an IRS audit letter, contact Attorney Sammy Kim now.
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