What Happens If You Get Audited And Owe Money – If you’re one of the less than 1% who received an IRS audit letter, don’t panic. Most likely, your tax return was flagged because of one of the common IRS audit triggers.
For most postal audits, the IRS will ask you to explain or verify one simple thing on your return, including:
What Happens If You Get Audited And Owe Money
Assuming you were completely honest when filing your tax return, an IRS audit can be handled relatively easily. However, if you are intentionally dishonest on your tax return, you can get yourself into trouble. In any case, if you receive an audit letter, you should open it immediately.
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If your taxes for the year are questionable to a tax professional, contact them for clarification. If he or she can’t help you or you don’t have a regular tax professional, consult a qualified tax professional immediately and review your return. If you need an experienced IRS audit attorney to represent you in an audit, schedule a consultation today.
Here are some important things to keep in mind when acknowledging and responding appropriately to an IRS audit letter, with the goal of getting the best results possible.
Just because you get a letter from the IRS doesn’t mean you’re being audited. In most cases, the IRS will simply send you a letter asking for more information or clarification on the details listed on your tax return.
An IRS audit letter will come to you by certified mail, and you’ll notice that an IRS audit is marked on the envelope.
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When you open it, the IRS confirmation letter will identify your name, taxpayer ID, form number, employee ID number, and contact information. The first line of text in your letter from the IRS might say something like “Your tax return (state or federal) for the above year has been selected for examination.”
Your letter from the Internal Revenue Service or Treasury Department will outline the main purpose of the audit and what documents you will need to provide to resolve it.
In most postal audits, the IRS will ask for receipts or documents to substantiate the item in question when filing your return, as well as an explanation of the circumstances that led to the filing.
Often the IRS will send you a certified letter because you are being audited. You may also receive a certified mail if the IRS has a problem with your tax return or if you owe a tax refund. If information is missing from your tax return, the IRS will first send you a letter by regular mail, which may not be certified. However, if you do not respond in time, they may send you a letter by certified mail. Regardless, if you receive a letter from the IRS, be sure to open it and take action on what you’re asked to do.
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Typically, an IRS audit letter comes from the Internal Revenue Service. An audit letter from the Treasury Department is also possible. The sender’s note should be on your IRS audit envelope.
If you have an IRS audit, you will receive an IRS notice by certified mail. You will not receive an audit notification by phone or email.
Below are examples of actual IRS audit letters our clients have received. Click to view each one.
There are a few IRS audits, each with unique requirements. Understanding how your audit will be conducted will help you decide what documents to collect and where to send them.
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Correspondence: The IRS will require additional information related to this section of your tax return, such as receipts or canceled checks.
Office Audit: The IRS will require you to bring certain documents to your local IRS office, where you will be audited.
Taxpayer Compliance Scoring Program Audit: The purpose of this audit is to update the information used to write the computer scoring program used by the IRS. In this case, your tax return will be carefully scrutinized and each item must be verified with documents, including birth and marriage certificates.
It is important to respond to an IRS audit letter as soon as possible with a phone call or within 30 days of an audit response letter. If you wait any longer, you may be fined.
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After you read the IRS audit letter and determine why the IRS chose to audit you, you should gather all the documents that support the deduction in question. They may include receipts, estimates, canceled checks, or travel records.
Generally, the IRS has three years from the date you file to audit you, so it’s a good idea to keep all of your tax documents for at least that long. However, cheating or not submitting paperwork can set them back even further.
If you don’t have documentation to support your claim, try to get support from third parties who have a reasonable way to prove your claim. For example, if the donations made in 2017 were audited and you have no evidence, contact the participating charities and ask them to send you documents from their archives.
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This letter will carefully address each of the follow-up issues listed in the IRS audit letter, provide any documentation related to the letter, and request a time and date to complete and resolve the follow-up issues.
While it can be tempting to write the letter yourself, there are risks. An audit response letter should be flawless, dotting every dot and crossing every T, as detailed by the IRS. A mistake can delay your audit.
An experienced tax attorney will know how to respond to the IRS based on your unique circumstances and the reasons for your audit. If done right, an audit response letter can solve the challenge more quickly.
The IRS will review your information and send you a response after you or your tax attorney submits a written explanation in your filing that you disagree with the findings.
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If you don’t respond to the IRS confirmation letter within the allotted 30 days, don’t respond late, don’t respond at all, or don’t respond correctly because you haven’t consulted a tax advisor, in most cases the IRS will deny your license. We’ll send you an item in question and a receipt on your tax return – plus penalties and accrued interest from the due date.
Just as late, incorrect, or no responses can get you into trouble, it’s also important not to submit too many responses because this will confuse the IRS. If the IRS Central Processing Center does not keep all of your letters together, it may appear that you did not receive a complete response, which could lead to the IRS not understanding your situation and ultimately subjecting you to penalties.
Mail checks can take anywhere from three months to over a year to clear. However, by responding accurately and timely, with the help of a tax attorney, you have a good chance of getting things done within a few months.
If an IRS tax examiner decides you owe more tax and a penalty is added, you can simply agree to pay or ask the IRS Appeals Office to review your case. They will review your case and any new information you have and give you an independent analysis.
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If you owe a lot of tax and you don’t have the money in hand, you don’t have to pay it right away. You can set up a monthly payment plan with the IRS or request an extension. If you’re having financial trouble, the IRS may offer other arrangements that allow you to delay payments or settle for less.
While ignorance is bliss, the worst thing you can do when the IRS sends you an audit letter is ignore it. The problem will not go away and you will have some time to respond before the audit notice turns into a tax bill.
If you receive an audit letter from the IRS, contact a qualified tax attorney to help you get the absolute best out of this situation.
My goal is to make the tax filing process as easy and stress-free as possible, so you can focus on the things that make you happy.
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