The IRS Automated Underreporter (AUR) system is designed to compare taxpayer income reports with third-party data, and it often uncovers discrepancies that lead to AUR notices. These notices are, of course, very useful to the IRS in ensuring compliance, but they can also be a source of confusion and stress for taxpayers, and inadvertent AUR errors are not uncommon. Avoiding AUR mistakes is a matter of knowing what some of the common errors are, how to resolve them, and how to stay away from them in the first place.
Avoiding AUR Mistakes: Be Aware of the Most Common AUR Errors
1. Neglecting the Notice
One of the most common mistakes is neglecting the AUR notice altogether. Taxpayers sometimes fail to recognize the importance of these notices and treat them like routine correspondence rather than time-sensitive matters that require immediate attention. Ignoring an AUR notice can lead to penalties, interest accrual, and more severe enforcement actions by the IRS in some cases. In other cases, the notice may be about something as simple as a wrong tax ID number.
It is always essential to read and understand the notice thoroughly, as it contains specific information and details the steps needed to resolve whatever AUR errors have been identified. Talk to a tax attorney right away to ensure you thoroughly understand the situation.
2. Misunderstanding the Nature of the AUR
Taxpayers often assume that all discrepancies mean an error on their part, and sometimes that leads them to make hasty amendments or payments they don’t actually need to make. Sometimes these discrepancies are the result of third-party reporting errors or timing differences that do not necessitate any action by the taxpayer.
You can only avoid making this mistake by not sending any money or changing your return until you’ve had a tax attorney do a careful analysis of the AUR notice and a comparison with your personal records.
3. Failing to Respond in a Timely Fashion
This one is a big mistake, as the IRS sets strict deadlines for responses. Missing these deadlines can result in automatic adjustments to your return, and any tax attorney can tell you that these adjustments are often to the detriment of the taxpayer.
A well-prepared response should address each discrepancy noted in the AUR notice, provide supporting documentation, and offer a clear explanation where necessary. This response will help in establishing your position and can prevent unnecessary adjustments and penalties. A qualified tax attorney can make sure you reply in a timely fashion and in a way the IRS will respond to.
4. Poor Record-Keeping
Inadequate record-keeping is a fundamental issue that complicates any tax issue, including an AUR response. Taxpayers who do not maintain organized and thorough records of their income, deductions, and credits are at a disadvantage when these discrepancies arise.
Good record-keeping practices requires keeping all relevant documents, such as W-2s, 1099s, and receipts for deductible expenses, which you will need in substantiating the accuracy of your filed return. If you have these records readily available, you can efficiently address any discrepancies the AUR system may flag. If you haven’t started keeping these kinds of careful records, start doing so now.
5. Misinterpretation of Tax Law
Another frequent error involves the misinterpretation of the tax laws that are applicable to the discrepancies identified in the notice. Tax law is notoriously difficult and often subject to changes that affect the way both you as a taxpayer and third parties, like employers, file.
It’s not uncommon to inadvertently apply outdated rules or misunderstand current regulations and thus end up offering an incorrect response to an AUR notice. The safest thing to do is always to talk with an experienced tax attorney who is keeping up with all the relevant laws and changes.
6. Making Assumptions
Relying on assumptions can lead to some serious errors when you’re dealing with AUR notices. It’s easy to assume that the IRS has made a mistake without thoroughly reviewing your records, or you may presume that your understanding of the tax laws is correct without verifying the details.
Assumptions like these can lead to an inadequate response that the IRS won’t accept and which will fail to resolve the discrepancies.
7. Poor Communication
Responding to an AUR notice with incomplete or unclear information can slow down the resolution process and have other, unintended consequences. It is important to be precise and thorough in all your communications: each point in the notice needs to be clearly addressed and backed up by appropriate documentation. Doing this shows that you’re diligent and organized, and this can facilitate a quicker and more favorable resolution.
8. Not Getting Professional Help
Many taxpayers attempt to handle AUR notices on their own precisely because they underestimate how complicated these notices are or the severity of the potential consequences.
Engaging a qualified tax defense lawyer who is experienced with AUR cases greatly increases the likelihood of having a successful outcome. A professional will be able to properly interpret the notice, prepare a strong and accurate response, and represent you in communications with the IRS.
9. Not Following Up On Your Response
Taxpayers often assume that once they have sent their reply, the matter is resolved. Again, never assume. Monitor the status of the response and any subsequent communications from the IRS. You want to be sure the response has been received, is being processed, and that any further information or action they require is promptly addressed.
10. Simple Procrastination
Procrastination is a significant issue in a lot of areas of life, and never more so than in any dealings with the IRS. No one wants to deal with the IRS, and it’s easy to let that lack of motivation lead you to put off getting things taken care of.
But if you do that, you risk missing important deadlines, which can lead to automatic penalties and interest charges. Act promptly upon receiving an AUR notice so you have sufficient time to gather all the necessary documentation, consult with your tax defense attorney, and prepare a comprehensive response.
Avoiding AUR Mistakes in the First Place
Ideally, you never want to get that AUR notice at all. By contacting a tax lawyer before you file, you can preempt many issues that lead to AUR notices. Furthermore, the IRS’s online portal allows taxpayers to view their account information, and this can sometimes make it easier to cross-reference notices with your records.
Finally, be aware of the potential identity theft implications related to AUR notices, especially if you’ve been careful in your filing and used a tax attorney. Don’t just throw that notice away in frustration: the discrepency might not have anything to do with you, a third-party filer, or your tax attorny. It’s always possible an identity thief may have used your information to file false returns or claim benefits, so if you suspect that identity theft might be involved, immediately inform the IRS and your tax lawyer and follow their advice.
By avoiding the mistakes above, you can get AUR errors responded quickly or even avoid them in the first place. Whether you’ve gotten a notice or you want to avoid it, we can help. Contact Silver Tax Group in Austin, TX today for help.
