IRS Audit Notices: Some Basics 

In 2022,  the IRS audited slightly over 600,000 returns, or roughly .4% of filed returns. The audit process commences by the IRS sending a written notice to the taxpayer.  Maicher CPA Pllc represents business and individual clients in responding to audits.  

Here is some basic information concerning audits every taxpayer needs to know:

  1. If you receive an IRS notice, don’t ignore it!  If it’s an audit notice, there are deadlines for responding and failure to timely respond may result in serious legal consequences.  Furthermore, numerous notices don’t involve an audit and may, in fact, be beneficial, like refund notices.  
  2. If the notice is audit related, forward it to Maicher immediately.  In the meantime, gather any requested documents, which often include, for example: invoices, canceled checks, legal papers, divorce orders, deeds, loan agreements, travel tickets, medical records, appraisals, employment documents and tax schedules such as K-1s.  
  3. Audit notices can take various forms.  An “IRS Letter P2000” is a notice that a return conflicts with data reported to the IRS by third parties and identifies the discrepancies as well as how to resolve them.  A “Correspondence Letter” usually seeks clarification of deductions or calculations in returns.   An “Audit Meeting Notice” requires taxpayers to meet or otherwise correspond with the IRS concerning the audit. There are three types of audits: (a) “Correspondence Audits” which require taxpayers to mail responsive records to the IRS,  (b) “Office Audits” which require taxpayers to personally meet  with an IRS agent at an IRS Office to discuss pertinent records, and (c) “Field Audits” is where IRS agents meet with taxpayers at their home or business to review records and other information.   It’s often critical to have experienced tax professionals at your side during these interactions with the IRS and Maicher is skilled in such representation.  
  4. Finally, audits can result in three possible outcomes: (a) no change to the return, (b) taxpayer agrees with the IRS proposed changes, or (c) taxpayer disagrees with the IRS’s proposed changes which triggers administrative and/or legal proceedings.   Again, Maicher can assist you in navigating these situations.  

Take-away:  An audit notice is not the end of the world.  Adverse outcomes are often avoided by promptly responding to notices with the help of skilled tax professionals.  Call Maicher if you receive an audit notice or are otherwise wondering how the risk of an audit can be minimized in the first place.     

 

Sources:

“IRS Audits Few Millionaires But Targeted Many Low Income Families in FY 2022,” Transactional Records Clearing House, Syracuse University (2023). 

“IRS Audits,” IRS Publication (July 10, 2023).

“Will the IRS Audit You? Take Our Quiz to See If You’re at Risk?” Forbes (April 13, 2023).