IRS Audits Increasing
IRS Audits Increasing
The $290 billion tax gap looks even worse than it did just a month ago. There’s nothing like the threat of economic disaster to put everyone on edge. Congress gets fidgety when there’s no money in the till and the IRS feels an increasing pressure to collect, collect, collect. Even before the recent economic troubles, everyone expected the number of IRS audits to continue to increase. It’s clear to us that the efforts to collect more revenue will reach even new heights over the next months.
Trending Upward
The number of tax returns being reviewed by the IRS has more than doubled in the last 7 years. In 2000, the IRS examined 1 out of every 202 returns. Last year, they looked at 1 out of every 97. In October alone, the IRS is expected to send more than 30,000 so-called soft notices by mail. Most of these notices will be prompted by inconsistencies in returns that cause the IRS to suspect you have somehow under reported your income.
So if you’re one of the unlucky, what do you do?
An IRS Letter is an IRS Audit
Make no mistake. Any communication from the IRS asking for clarification or more information about your tax return is an audit. This is dangerous territory. First things first. Take a breath. Realize you’re being audited by the Internal Revenue Service. Then act appropriately.
Use Your Head
If you receive any communication from the IRS requesting information or alteration to your tax return, I strongly encourage you to seek help. Talk to your tax or financial professional about the situation immediately. If you don’t have one or you are not sure of their competence level on this, contact a firm that specializes in IRS matters such as TaxMasters. We handle more audits in a year than most firms do in a lifetime.
The audit experience can be incredibly complex, particularly when trying to handle the matter yourself. With the increased pressure to find more revenue, IRS agents are up to many of their old tricks and are not above taking advantage of the unsuspecting. Don’t let the IRS turn a simple mistake into a costly nightmare.
As always, TaxMasters is here to help. Call our tax professionals today at (866) 694-4018 or go to www.txmstr.com and let us get between you and the IRS.
We are here to help.
Until you need us,
Pat Cox
Are there particular items or categories on my return that make me more likely for an audit? If so, what are they?
How does the IRS decide whom to audit? Is it random, or do they just look at a cross-section and go from there?
Gary,
There are things that the IRS looks for. They have an automated process that identifies typical issues like large charitable donations out of synch with your income level and large deductions for travel, entertainment, and meals. They also tend to concentrate more on self-prepared returns than those prepared by a tax professional. After the automated process flags a questionable return, the IRS may manually review the information to determine whether to conduct the audit. We see more audit cases with self-employed taxpayers and taxpayers with rental property, as well. Please don’t construe this as tax advice, but use it as information only. If you are serious about avoiding an IRS audit, use a good tax CPA to prepare your return and always keep your records. And if you get hit with an audit notification from teh IRS, give us a call. We provide comprehensive IRS tax audit help and have a great deal of experience dealing with IRS agents. Of course, it helps that we hire ex-IRS agents and tax attorneys.
Patrick Cox, Tax Masters
Mark,
Take a look at my previous response to Gary. IRS tax audits are not random. As a matter of fact, the IRS is more likely to perform an audit if they think they have a good chance at gaining significant revenue. Large deductions and charitable contributions that are out of synch with your income are things to watch closest for staying out of tax audit trouble.
Patrick Coxx, Tax Masters
Dear Patrick,
$ 290 Billion tax gap. Next years estimated net income for my company will average about $1.6 m / month. How can I protect my income from the IRS? Real Estate? Trust Fond? Any advice would be appreciated.
Ruud,
Tax Masters was founded on the idea that we need to find ways to help people pay and settle their taxes. Sometimes that involves tax debt relief after a taxpayer has run into trouble with the IRS, but we do not offer advice on how to find ways to “protect income from the IRS.” As a matter of fact, an entire segment of our clientele has wound up audited and in trouble with the IRS because they fell victim to tax scams that promised to get them the largest return possible. Stay away from tax preparers who promise big returns. That can be huge trouble. The things to remember that will keep you on the right track with the IRS are to file your IRS tax returns on time and pay on time to avoid penalties and fees. Stay on top of your expense and deduction documentation and keep solid, clean records. Hope that Helps.
Patrick Cox, Tax Masters
I got a letter from the IRS stating I could not claim my 2 Grandson’s that lived with me for 8 months of 2007. My Daugther signed a noterized letter and I sent what information I could get from the school and their Drs. The problem is that the letter from the IRS came a year after the boys were back living with their Mother, and I was no longer listed as their temp. care taker with the school or their Drs. I am going to appeal this matter I feel the IRS is calling me a lier that the boy’s lived with me. I have been told that the IRS has the burden of proof in this matter is this true? I sent all the documents proving the boy’s Father had no right to claim due to back childsupport. The reason the boy’s lived with in Dec. 2006 the 5 bedroom home where my Dau. was living sold and she was forced to move to a very small 2 bedroom and there was no bedroom for the boy’s and the loandlord would not rent to her if all 3 children lived in the small 2 bredroom. My Dau has 3 children 2 boy’s and 1 girl. Then right after moving she lost her job as a travel nurse due lack of work and when from $32 an hour down to $20 an hour. There was no way I was to let my Dau. and Grandson’’s be homeless and my Dau lose in income(with no childsupport)could not make it feeding all 3 kids so I let the boy’s live with and paid for all their needs. Please any help you may have would be great. Thank you E. Diana Dorsey. P.S. the bad part now is I lost my job 2 months ago and living on half of my income.
Diana,
The short answer is that we can help you with this tax problem. However, there are factors we need to discuss to determine the viability of our service solutions. For sure, the burden of proof is on you because the IRS has already determined that you did not qualify for the deduction or credit. I have passed your email address to one of our highly capable tax consultants so you should be hearing from us shortly. As always, you can pick up the phone and call us at 866.694.4018.