If the IRS sends you a Audit Letter, it is usually because the IRS wants you to explain or verify something in your tax return. These typically include unreported income, information on dependents, filing status, itemized deductions, and eligibility for credits. You should read the letter, and preferably consult a tax professional and take his advice. There is no need to panic because getting a letter from the IRS does not always mean you are under audit.
Identifying an IRS Audit Letter
IRS used certified mail to send audit letters. The letter will contain your name, form number, taxpayer ID, employee ID, and contact information. The letter may state that your IT return for a specified year has been selected for examination, reveal why you received the letter, and what you need to do to resolve it.
Different Types of IRS Audit
Since the IRS conducts different types of audits, you also need to understand. How you are being audited to help you decide how to respond. In a Correspondence Audit, you will need to provide the IRS with additional information on some aspect of your IT return, like canceled checks or receipts. An Office Audit will ask you to come personally to a local IRS office for the audit. In a Field Audit, an IRS agent will visit you to carry out the audit personally. A Taxpayer Compliance Measurement Program Audit will call for an extensive examination of your IT return with all items requiring substantiation with documentation.
Responding to the ITS Audit Letter
According to the IRS, you should never ignore an IRS notice. You must reply with a letter or a phone call within 30 days, failing which you may be fine. After understanding the reason for the audit, you will need to gather all evidence to support the questioned deduction. Since the IRS is allow three years from the IT return filing date to audit you. You should also preserve all your tax documents at least for this period. However, you must remember, that if you have not filed your return or are under investigation for fraud, the IRS can demand documents for a longer period.
Writing the Audit Response Letter
Your written response to the IRS audit letter should contain your full name. tax ID number, contact information, employee ID, business ID, etc. With the name of the IRS officer handling your case. You should address each issue the IRS has raised in its letter and provide the documentation as proof. Since the information and the presentation of the letter are vital for settling the audit, it is recommended the letter is drafted by experienced lawyers for IRS notice who know the specifications and expectations of the IRS.
An expertly-crafted audit response letter with all necessary clarifications and documents can expedite the resolution of your audit. After receiving the response, the IRS will review it and send its response. It is important to remember in case you don’t respond to the audit letter. Don’t reply in the allowed 30 days, or respond incorrectly, or completely. The IRS will disallow the questioned items in your tax return and send you a bill, including interest and penalties.