Don’t expect an IRS agent at your door if you’re being audited

On Behalf of | Jan 16, 2020 | Firm News

Like most Connecticut residents, you probably never expect the IRS to audit you. You file your taxes on time, try to follow the rules and arrange to pay what you owe, if anything. More than likely, you will go your whole life without facing a tax audit, but then again, your luck could turn.

If you do end up facing an audit, you probably expect an IRS agent to show up at your door, demanding to see your records. You would expect the investigation to happen in person. Unfortunately, this isn’t the case in most audits these days, and if you aren’t diligent, you could miss a very important notice from the agency.

The way IRS audits have changed

Like any other government agency, the IRS’ budget cuts require the agency to do the same work with fewer resources. So, the agency adapted. While the IRS still conducts some audits in person, the majority of them are done by mail now. What this means for you is that you need to carefully scrutinize any communication you receive from the agency. It could be a notification of a paper audit.

Many audits simply challenge small deductions, credits and the like, so the IRS no longer sees the utility in sending an agent to talk to you. Instead, you must send in documentation supporting your position for someone at the agency to review. You will then receive notification in the mail of the results of the audit. If you fail to respond, then you admit by omission that the IRS is correct, and you could end up paying more taxes, penalties and interest that you didn’t necessarily have to pay.

Who is most vulnerable to an audit by mail?

Since the IRS is not auditing as many people these days, it tends to red flag certain returns for an audit by mail. If you claim the earned income credit, you will more than likely make the list. This particular credit appears to be the subject of a substantial amount of tax fraud, so when someone claims it, it draws the attention of the agency.

What to do if you receive an audit notice

Your response to the audit will determine whether the IRS demands more of your hard-earned money or not. The first thing you need to do is to read it carefully and not ignore it. Further, you may want to take it to an experienced tax attorney for review, along with an explanation of your rights and options.