In recent years the IRS has made a dramatic shift from in-person examinations to “audit by mail”. There are several reasons for the change to mail. It requires less labor than one-on-one meetings (today even the IRS has to deal with a downsized workforce). Besides being cheaper, it’s faster and gets better results: Most people are so afraid of an IRS mail notice, they will pay whatever the IRS says is due, hoping it won’t elevate to something even worse from the government.
Mail audits may be more convenient for the IRS, but pose numerous drawbacks for the taxpayer. The letters can have complicated wording, they are just hard for a layperson person to understand. The biggest problem for taxpayers is: IRS notices are often wrong. For example, the IRS may send you a letter denying your unreimbursed employee business deductions. The letter proposes assessing extra taxes — unless you provide adequate documentation within 30 days. Even if you send in documentation on time, the IRS may not get to your response by the deadline. Let’s face it; the IRS isn’t the most efficient! You think you’re done; instead you get a stronger letter from the IRS. It’s a notice of deficiency, also known as a 90-day letter, with a choice: protest in U.S. Tax Court or pay the assessed tax. If you weren’t willing to write a check the first time, you probably will be now.
This bears repeating: IRS notices are often wrong. Using a tax professional can be your best line of defense for mail audits. Starting in April 2012, The IRS set up a Practitioner Priority Service hotline specifically for mail audits. You can sign an authorization for a professional to speak to an IRS specialist on your behalf. A tax professional’s call will be immediately directed to the right specialist depending on the type of taxpayer issue. Once your tax professional explains the situation and history of correspondence, the IRS specialist will provide instructions on how to proceed. This IRS representative has the power to grant additional time for your case to be reviewed, anywhere from 14 to 30 days. Once you (through your tax professional) and the IRS are on the same page, this is usually ample time to get your mail audit resolved.
The worst thing you could do with an IRS mail audit is to ignore it; the IRS won’t forget about you. The second worse thing to do is to just pay the assessment if your reasons to contest it are valid.
It is not easy for the taxpayer to communicate with the IRS, and your fear can often get in the way of fairness. Call Gary Kaplan, C.P.A. to discuss your IRS letter; he’ll be on your side.
