Logo of the Internal Revenue Service (Photo credit: Wikipedia)
April 15, 2013 will be a tax day that will live in infamy with the bombings at the Boston Marathon. Our thoughts and prayers are with the survivors, the families of those who perished, the investigators and all the people of Boston. It was thoughtful of the IRS to extend the tax deadline for 3 months for Boston area residents and U.S. participants of the marathon. It’s automatic for residents of Suffolk County, Mass. Those who participated in the marathon, but don’t live in that county may call the IRS at: 866-562-5227 and request an extension.
Many of you who have filed already may think, “Ah, it’s over! My tax return is done and I don’t have anything to worry about.” Yes, until that dreaded certified letter comes in the mail notifying you that you’re being audited by the IRS. (They can also call you, but they’ll follow-up with a letter afterward.)
Why in the world would they be auditing me?
You’re probably self-employed. If you don’t get a W2 form from an employer which shows that taxes were deducted automatically, you’re on the honor system when it comes to reporting your true earnings and the deductions you took were valid ones. If you’re a 1099 contractor and all your income was reported on 1099s, you shouldn’t have a problem. Depending on how many “red flags” appear on your return, they may want you to show proof of certain expenses or require an full audit. This is not to say that only self-employed people get audited. You may be selected totally at random. Or you may be connected to an investor or partner who’s being audited. It’s also possible that documents don’t match – like W2s or 1099s from the payor don’t match what you put in your tax return. This may occur when an employer, especially with 1099s, didn’t send out the forms by Jan. 31, which may have left you “guessing” the amount.
What is an income tax audit?
An IRS audit is a review/examination of an organization’s or individual’s accounts and financial information to ensure information is being reported correctly, according to the tax laws, to verify the amount of tax reported is accurate. (IRS)
If you accurately reported your income and expenses and kept careful records of everything, you shouldn’t have much of problem.
But if you do get an audit letter from the IRS, here are steps you should take immediately:
- Open it. You cannot ignore it and the problem won’t go away.
- It may be that they just want additional copies of records or information. Send what they are asking for by the date designated.
- If it’s a face-to-face audit, get representation immediately. Don’t go it alone. You may say something that will make things worse.
- If you cheated on your taxes and they caught you, again, get representation immediately.
Your rights as a taxpayer during an Audit:
- A right to professional and courteous treatment by IRS employees.
- A right to privacy and confidentiality about tax matters.
- A right to know why the IRS is asking for information, how the IRS will use it and what will happen if the requested information is not provided.
- A right to representation, by oneself or an authorized representative.
- A right to appeal disagreements, both within the IRS and before the courts. (IRS)
In any rate, don’t lose sleep over it — give us a call.
The go-to guys in Phoenix for IRS Tax Problem Resolution!
Edward M. Osinski, Jr., CPA, PC
Two Phoenix locations to serve you:
717 W. Dunlap Ave., Suite #110,
Phoenix, AZ 85021
Local (602) 944-5458
Toll Free 1 (888) 275-2272