What To Do If You Receive an IRS Audit Letter
If you receive an audit letter from the Internal Revenue Service (IRS), it can be a stressful and daunting experience. However, there are several things you can do to prepare for the audit and make the process go more smoothly. In this blog, we’ll go over three things you can do today if you receive an IRS audit letter.
Contact the Revenue Agent and Ask for Additional Time
The first thing you should do is contact the revenue agent who is listed on page one of the audit letter. You’ll find a telephone number and the name of the agent. You should ask them for additional time to prepare for the audit. The IRS will give you 10 days to contact them from the day you receive the letter. However, you’re going to need more time to gather all the necessary documents and records. So, ask them for at least 30 days, and maybe even 60 days, depending on where the records are located. The audit letter requests that you set a meeting with the IRS and provide them with all the necessary records and information to substantiate each and every number on your return.
Contact Your CPA and Get a Copy of Your Tax Return
If you have a Certified Public Accountant (CPA), the next thing you should do is contact them and get a copy of your tax return. You want to make sure that you have all the necessary records to support each number on your return. If you
don’t have a CPA and you prepared the return yourself through TurboTax, you’re going to want to at least get your bank statements, canceled checks, and deposits, and start from there.
When preparing for an audit, a law firm like Milikowsky Tax Law goes through the bank statements and performs a bank deposit analysis. This means that every deposit that goes into the bank account is counted to ensure that the right income number is reported.
Request a Wage and Income Transcript and an ERPTR Report from the IRS
Another thing you can do from day one is to call the IRS and request a wage and income transcript for yourself. If you have a business, you’re going to want to ask for an ERPTR report, which stands for “Electronic Return Program Transaction Report.” This report will show you all the income reported by third parties for your business, making sure that it is accurate and that you reported the correct amount of income on your tax return.
In 2022, a new development is that the IRS wants to identify any sources of income you received through cryptocurrency on the 2022 1040 return. The IRS considers cryptocurrency or virtual currency as property, and everything is potentially included as taxable income. If you bought or sold cryptocurrency or received it as payment, you’ll want to have proof of its value.
Always Be Truthful to the IRS
Most importantly, always be truthful to the IRS. If you don’t have the information or realize there may be a discrepancy, definitely call a tax attorney. A tax attorney can help you develop a narrative and a strategy before meeting with the IRS. There are always two sides to a coin, and multiple ways to interpret something. You want to have all the facts, all the documents ready, understand where the problems are, and have a tax attorney go through all of it to provide a legal defense and a narrative to explain to the IRS how the numbers are coming together. This will facilitate the audit process and make it go more smoothly.
In conclusion, receiving an audit letter from the IRS can be intimidating, but there are steps you can take to prepare for the audit and make the process go more smoothly. To sum it all up: Firstly, contact the revenue agent and ask for additional time to prepare for the audit, ideally 30 to 60 days. Secondly, contact a Certified Public Accountant (CPA) or obtain necessary records and documents to support each number on your return. Finally, request a wage and income transcript and an Electronic Return Program Transaction Report (ERPTR) from the IRS, always be truthful when dealing with the IRS, and contact a tax attorney to support you in the process.
The post Your Checklist to Prepare for IRS Audits in 2023 appeared first on Milikowsky Tax Law.