Over 1 million taxpayers are audited every year. Most of those audited are audited through a letter. The IRS sends a letter to the taxpayer, requesting further information concerning item(s) in the tax return. If the taxpayer being audited responds to such a letter with the required information, then it will typically end the IRS investigation. However, at times, the investigation may not be conclusive or one could have given wrong information on his or her tax return. In such a case, the IRS may seek further investigation that may result in back taxes, penalties, and interest. If you ever receive any of these audit letters from the IRS, here is some information that can help you out:
Respond to the IRS in a Timely Manner
IRS auditors are human and thus, subjective to some extent. This means that if you are pleasant and respond to them in a timely manner, you may have a much better time and receive some leniency and favors in return. On the other hand, if you ignore the audit letters or are rude to an IRS auditor as they seek for information concerning your taxes, then you may end up with a more intense audit and harsher consequences. The IRS auditors usually have quite some leeway when settling tax cases and you can gain some mileage by simply being polite and cooperative.
Provide the Information Needed
When contacted by the IRS to provide them with information, mail the required documentation as soon as possible. If you do not respond fast, you will get into further problems with the IRS. The IRS will normally start out with a polite letter but if you fail to respond, the subsequent letters often become more demanding and harsh. Therefore, respond to the IRS as soon as you receive such a letter. If the information that the IRS is requesting for is not readily available, then you can always ask for an extension of a week or two to obtain and/or prepare the required documentations.
Negotiate Your Position
If you have the required documentation requested from the IRS, sending it should settle any audit matters. However, you may find yourself in a situation where you are “on the wrong.” In such a case, you will need to know your options. One advisable thing to do in such an instance is to seek professional help. You will need to negotiate your position with the IRS to get the most favorable terms. Therefore, you can get help and ask as many questions to see how you can best position yourself in the situation. You can find out the options that you have or see if you can be entitled to various waivers and reliefs. The IRS provides reliefs such as an Offer in Compromise or Installation Agreement that can help you better manage back taxes and other IRS tax debts.
Stick to the Agreement
Once you agree with the IRS on a plan to settle the tax issue, ensure that you stick to the plan. If you have agreed on an Installation Payment Plan for example, ensure that you pay the required installments in a timely manner. This not only helps you avoid further confrontations with the IRS, but can also work to your advantage in case you get into another tax problem in the future.