Taxpayers are way more likely in recent years to receive an audit letter in the mail requesting documentation to verify income, deductions or credits claimed than they are to receive an in person examination.
Of the more than 1.6 million Americans who were slapped with audits last year, 78% dealt with correspondence audits, while only 22% were asked to come in for an in-person examination.
Part of the reason the IRS is shifting its gears is due to the expense of in person audits. A correspondence audit costs the IRS less money because it requires less time and attention on their end.
While a face-to-face examination with an IRS agent can involve going through an entire return, correspondence audits usually ask taxpayers to provide information about very specific items on a tax return, like income, expenses or deductions.
Though correspondence audits are easier for the IRS agents they are still very scary and cumbersome for the taxpayer. Often times these letters are written using complicated tax terminology and can be very difficult for the average taxpayer to understand. And being that the letter is mailed there is no real way for the IRS to even know if the taxpayer received the letter let alone understood it’s contents.
Out of a sample of 754 taxpayers who claimed the Earned Income Tax Credit and were audited, more than a quarter of them had no idea they were even being audited, the Taxpayer Advocate Service’s most recent survey found. Nearly 40% of the same respondents didn’t know what information the IRS was asking them to provide.
If you ever receive a letter in the mail regarding your income taxes the best advice we can give is to have a tax consultant review the information requested along with the tax return in question and give you a detailed list of the items you will need to back up. This way you will be prepared when submitting your documentation. Need audit assistance? Call us at 1-888-APRIL-15!
Source: Yahoo Finance