Individuals and small business owners expect their annual income tax headaches to end after the submission of their federal return. The Internal Revenue Service (IRS) processes the return and accepts their payment or issues a refund check, if one is necessary.
However, some people are not that fortunate. Every year, thousands of people receive audit notices from the IRS due to issues with their income tax returns or concerns about the underpayment of federal income taxes. People opening letters from the IRS tend to panic or may refuse to acknowledge that there’s a problem by ignoring the letter.
What steps can those who receive an audit notice take to protect themselves?
1. Read the letter carefully
IRS audit letters often provide a few details about what triggered the scrutiny of a taxpayer’s history. In some cases, the IRS may have made a mistake and issued the letter to the wrong person, possibly because there are two taxpayers with the exact same name or similar Social Security numbers. Validating that everything in the letter is accurate is a key first step.
2. Conduct a self-audit
Once the IRS has asserted that there is an issue with the tax return, taxpayers can review their recent returns to see if they failed to declare income, made calculation errors or attempted to claim exemptions or credits for which they were not eligible.
3. Talk to a tax attorney
The best time to call a tax lawyer is the same day that an IRS letter arrives. People can ensure they follow the appropriate procedures and can count on the advocacy of the attorney they retain throughout the audit process. A lawyer can help people understand their rights and respond to the pending audit effectively.
4. Submit required records
The audit process typically involves providing specific financial records for the IRS to evaluate. The lawyer assisting the taxpayer can help them gather and properly submit those records to the IRS before the window to do so closes.
5. Prepare for an in-person audit, if necessary
People who must appear in person at an IRS office and business owners who may have an on-site audit conducted may need to prepare for that process by gathering records and preparing themselves emotionally for the stressful process ahead. An attorney can help those facing an in-person audit put their best foot forward by curating their appearance and helping them understand how to manage stress during the audit process.
Knowing how to handle an IRS audit can make a major difference for those who have recently received an IRS notice. The right steps can diminish the likelihood of an unfavorable outcome that could lead to collection efforts or other enforcement actions.