By Gabe Tsui – Tax Principal, CPA, JD
IRS audits of taxpayers are seemingly on the rise. Keep in mind that the IRS will always initiate an inquiry with a written letter via U.S. mail. Ignore all those recorded messages and robocalls threatening that you owe money to the IRS, that a lawsuit has been filed against you, and that the police are on their way to arrest you. These scam artists are hoping you are unaware that the IRS will never make an initial contact via telephone. Don’t fall for these traps.
If you receive a letter from the IRS stating that you will be audited, don’t panic! The first thing to do is to make sure you are actually being audited. The IRS often sends out notices informing taxpayers that certain items on their tax return were adjusted. For example, if you mistakenly thought you had made $20,000 in estimated tax payments when in fact you only paid $15,000, the IRS will adjust the amount and send you a notice. This is not an audit. This is simply a letter informing you that the IRS has made a correction.
An audit notice will state it is a “Notice of Audit,” or “your return has been selected for examination,” or words to similar effect. A notice often indicates that the IRS wants to conduct an in-person interview and may disclose what items on your tax return the audit concerns.
If you receive an audit notice, you should contact your accountant or tax attorney immediately. Never contact the IRS yourself, as care must be taken not to admit or reveal any information that may be sensitive. Your advisor can contact the IRS auditor, make inquiries as to what information the auditor wants to examine, and advocate on your behalf.
Your advisor will work with you to review the information and documentation supporting the particular items of interest. Most importantly, your advisor will be present with you during the in-person interview. Although the advisor cannot answer the auditor’s questions on your behalf, they will ensure that the auditor’s questions do not extend beyond the scope of the audit, be able to explain any technical questions or terminology to you, and clarify any of your responses.
Bronswick Benjamin’s team of experienced tax accountants and attorneys will ensure that your audit goes as smoothly as possible. If all goes well, the audit experience will be inconvenient but not financially painful. In next month’s newsletter, we’ll discuss what you can do in the event of an unfavorable audit.