Income Tax Audits
A Correspondence Audit is by far the most common way the IRS will examine your tax return. It is generally used with individual taxpayers and very small businesses. It always starts with a letter, (CP2000 notice) that represents a proposal on the part of the government which will usually specify what income they believe that you have omitted from your tax return for a specific year.
The first page shows the Summary of Proposed Changes and the next pages specify what the IRS believes you may have omitted. This notice is NOT a bill or assessment of tax but rather an informational notice that provides you the opportunity to refute the IRS’s assertions.
The IRS requires a response within 30 days from the date on the notice that will indicate (1) agree with all of the changes, (2) Agree with some of the changes or (3) do not agree with any of the changes. You must respond by mail or fax and need to include an explanation and supporting documentation with any item(s) for which you disagree. If you fail to answer this notice with 30 days or fail to request an extension to respond, then the IRS will assess income tax, interest and penalty and expect payment.
If this is your situation, contact us at TaxDeb.com and we can help you determine the correct amount of tax due, if any, and communicate this to the IRS.
A Desk Audit is another method of examination that the IRS will use to audit individual taxpayers and small businesses. It is conducted at the local IRS field office and generally lasts two hours or less. The taxpayer will receive a letter which confirms the year(s) being examined, the expense and/or income items in question and what type of proof is required. The date, time, location and revenue agent you will meet with are also specified in this letter.
Upon receiving this notice, the taxpayer has 10 days to confirm or reschedule the appointment. The key to a successful desk audit is to (1) be prepared (2) be on time and (3) be courteous and respectful and expect the same. If the auditor determines that there are significant changes on any year’s tax return, he or she may be required to expand the scope of the audit to include additional years.
If you receive an examination notice that requires a Desk Audit, contact us at TaxDebt.com for a consultation or representation.
A Field Examination (audit) is used to examine the tax returns of small to large businesses and entities. Field Examinations are generally not conducted on individual taxpayers unless their tax return reports the income and expenses of a substantial business activity and will involve a personal visit by the IRS to your place of business or your representative and may last from days to several months!
It is strongly recommended that you get competent, professional representation by a CPA, Enrolled Agent or other tax professional BEFORE your Field Examination begins. Contact TaxDebt.com to speak with any of these professional to assist you.
The requirements of whatever kind of examination the IRS is conducting are require the same basic approach: Communicate effectively, be able to prove what you say, understand where you are in the process and never miss a deadline!