IRS Audit Letters

Responding To The IRS

Almost half of all IRS tax audits originate with your receipt of an official IRS taxpayer letter requesting that you to provide additional information concerning your tax return and to supply the IRS with further supporting documentation. There is no need to panic at this point – but you should clearly proceed with caution.

Sometimes the IRS will ask for further clarification regarding a part of the return, and sometimes the auditor will ask for your entire tax return even including past years. If you are unlucky enough to be audited, remember, you will have the opportunity to dispute their findings. However, if you know you owe the unpaid tax, it is not advisable to challenge their finding just because you are being audited.

It is unwise to use the audit process as a way fighting collection rather then just by acknowledging the underpayment and negotiating the best possible repayment terms you can. It is best not to wake a sleeping giant. Be courteous and respectful. The last thing you want is for the auditor or the auditor’s local field office to think you are being dishonest with them. If you are, expect them to make your life very difficult and they have the power to do it.

Dealing With The Tax Auditor

Here are a few tips in dealing with the tax auditor. First, 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 be contacting your tax preparer immediately and will be getting back with them as soon as possible. This way, the IRS knows that you are cooperating with their investigation. Second, never give the IRS auditors false or misleading tax information. Also, make sure you are current on your past years taxes, since it is the IRS stated policy not to negotiate with anyone unless thy are current on their back taxes.

Finally, 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 is itself a misdemeanor punishable by up to one-year in county jail.

Be Responsive To IRS Requests – Don’t Delay

As soon as your receive notification of an IRS tax audit, you should immediately contact the tax adviser who prepared your tax return. Your tax adviser should be able to explain the IRS tax audit process to you and can assist you in preparing for the tax audit. This does not mean however that the person who prepared your tax return is the best possible professional to be representing you at the audit.

If you honestly believe you do not owe any more taxes, you should probably consider retaining a defense tax expert to represent you in the audit. But remember, tax audits can be dangerous matters and have the potential to carry criminal consequences. It is in your best interest to find the right tax professional, preferably someone with more then three years experience in defending IRS audits. Some experts believe that retaining a tax professional who has previously been employed by the IRS as an auditor, should be your best choice. You will need to make that determination on your own.

Statute Of Limitations To Collect Back Taxes

Under the current statute of limitation, the IRS has up to ten years to collect back taxes from you from the time the tax debt was originally assessed by the IRS. You should know that there are a number of circumstances that can operate to extend the ten-year statute of limitations such as a bankruptcy or the filing of an accepted offer-in-compromise. There are also circumstances in which the IRS has been know to make mistakes such as sending out their assessment notification to the wrong address causing substantial delays in their collection process. Finally, most taxpayers end-up owing the IRS some money at the conclusion of 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.

 

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