There can be very few IRS tax problems 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 misreporting 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 fall deeper into the IRS problem of receiving an audit report, do not panic, for help is here. Read on.
Why Did I Get A Letter From The IRS?
When most people get a letter from the IRS in their mailbox, their first instinct is to expect bad news. Most taxpayers receiving these letters instantly suspect they are getting audited. However, this is not the only reason why the IRS might send you mail.
After receiving the second audit letter, the first thing you must do is learn about the reason for the audit. Some of the most common IRS problems due to which you might receive an audit letter include:
- When 1099, W-2, cash wages, and other forms do not match reporting. Inaccurate deductions also provide enough ground for the IRS to opt for an audit.
- When the taxpayer’s report shows a transaction with a person whose returns are audited.
- More than usual withholding
- Random selection (believe it or not!)
There are plenty of other reasons why the IRS might send you mail. This includes IRS tax debt, corrections to your tax returns, and modifications to your refund. The IRS might also contact you about simple matters such as questions about your filed tax returns or to solicit additional information.
Let’s have a look at the most common IRS tax problems that cause the IRS to look deeper into a tax return.
Related Blog: Simple Ways to Settle IRS Tax Debts
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An Unreported Income
As mentioned earlier, discrepancies in your reported income are the easiest way to catch the IRS’s attention. The IRS has access to information on your income. If you decide to report an income that doesn’t match the information of the previous year’s return, problems could arise. Not reporting your earnings accurately will quickly be followed by a letter from the IRS. To avoid this, you should report all received earnings on your tax report. To get help with IRS tax problems, consult an experienced tax lawyer in Fort Worth, TX.
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Large Contributions To Charity
Charitable contributions can be deducted from your taxes, which is a useful resource for many taxpayers. Yet, charity deductions require itemizing, which makes the process a bit complicated. To deal with the situation, some taxpayers decide to bundle several charitable contributions together. Although this might seem like a good idea at first, it could lead to some unwanted attention from the IRS. This is especially true if your charitable contributions are perceived as being high in relation to your income.
The IRS is familiar with how much taxpayers in your income bracket typically contribute to charity. Exceeding the expected contributions instantly stands out and sparks the IRS’ interest. If you plan to donate to charity, your Fort Worth tax attorney can advise you on how to present the contributions on your tax return. Keep all documents related to your donations in case you need to provide them to the IRS.
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Claiming Earned Income Tax Credit
Earned income tax credit is a useful tool for low-income taxpayers that provides a refundable tax credit in varying amounts. Low-income families with children can typically qualify for larger amounts of credit. However, if you are planning to claim earned income tax credit, you should take into account that it will cause the IRS to look at your return more closely. If you are going to claim earned income credit, make sure you meet all requirements to do so.
Every correspondence by the IRS has a notice number displayed in 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 the 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.
These letters are very important and deserve your immediate attention. Promptly addressing IRS tax debt issues, for example, enables you to start working toward IRS tax debt relief or reach out to the IRS Office of Appeals.
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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 evidence. 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.
In most cases, IRS letters involve issues to do with federal tax returns or tax accounts. Each IRS letter or notice will present a specific issue. In turn, it will map out specific instructions you should follow to work through the problem. By ignoring the letter, you not only prevent a resolution to the problem but allow it to grow.
If you’ve been notified regarding the need to pay IRS tax debt under threat of penalties, the best thing you can do is take timely action. This involves looking at different IRS tax debt relief avenues or studying the IRS appeals settlement guidelines. A tax lawyer can best help you evaluate the alternatives according to your own case.
No matter what the topic of the letter is, make sure you review all the information with the utmost care. Verify that all data is correct. If you suspect some information is erroneous, take note so that you can later contact the IRS.
Keep in mind that while you should act promptly, you should not reply to an IRS notice letter. Unless the letter instructs you to do so, writing a response letter isn’t always necessary. The best response you can have to a letter is resolving the issue presented. That can mean anything from paying your IRS tax debt to providing some missing information.
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 certificates. 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
Even though it may seem like the biggest IRS tax problem, 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 in IRS tax problems like these, your tax lawyer be present, especially during an in-person audit or a TCMP audit. If you are in Fort Worth or any nearby area and need professional tax filing consultation services, seek help from the tax lawyers at the Law Offices of Nick Nemeth. Let us know your issue by filling out our contact form, and we will take it from there.
