Tax Talk

How To Deal With The IRS

By Candace Bahr, CEA, CDFA and Ginita Wall, CPA, CFP

Only one percent of all tax returns are audited each year. Even if you are audited, you should encounter few problems if you have reported all of your income and have kept careful records of your deductions.

If the information reported by payers on W-2s and 1099s does not match what you reported on your tax return, the IRS may send you a notice requesting additional information, called a Document Matching Notice.

If you find that the payer has made an error, supply the payer with the proper information, and then outline your request in a letter to them, asking that they issue a corrected form to you. Then send this corrected form to the Internal Revenue Service, along with a letter of explanation.

If the payer is not able to correct the information, send the IRS a letter of explanation with whatever documentation you can present.

If you do not do this promptly, the IRS computer will automatically churn out a second, more threatening notice.

If you receive the second notice, circumvent the computer by calling the IRS and talking with a staff person.

The IRS may also select your return for either a correspondence audit or an office audit

For a correspondence audit, the IRS will ask you to mail them documentation of one or two items on your tax return.

For an office audit, the IRS will send you a letter listing a number of items they want to audit, and they will provide a telephone number to call to schedule the audit.

Do not ignore this notice. If you do not schedule an appointment, the IRS will disallow all items they have selected for audit and you will receive a very large bill for taxes, interest, and penalties.

When it comes to income taxes, you are considered guilty until proven innocent. 

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