What Led To Your Tax Audit?
An audit does not by itself mean you are guilty of wrongdoing. However, an audit does increase the likelihood that you could face severe tax penalties or even criminal charges.
Which is why it’s always a good idea to revisit why individuals get audited and how to avoid audits.
Generally, the IRS can audit returns filed in the past three years. The penalties that result from an audit can be severe. It can be as much as 20 percent of the amount of an “erroneous claim.”
If the IRS decides a return is frivolous and doesn’t contain enough information to assess whether it’s accurate, a taxpayer may face a penalty of $5,000. Also, just as a reminder, taxpayers can face criminal charges if the IRS feels you are guilty of tax evasion or fraud.
Another important note about the reconsideration process is that it isn’t the same thing as filing an amended return.
If, for example, you previously paid the amount the IRS says you owed but now realize they were wrong in their assessment, you must file a formally amended return instead of seeking reconsideration.
Reconsideration requests are also not appropriate for people who resolved their tax liability by accepting an offer in compromise or by filing closing agreements, or for those whose tax liability has been adjudicated by the United States Tax Court.
9 Common IRS Audit Triggers
However, the IRS will also more likely audit a certain type of individual. This can include those who earn more than $200,000. The IRS will also be on the lookout for significant changes in income, and will pay attention to salaries of principals in S Corporations if that salary is unusually low. And the IRS tends to audit businesses that mainly deal in cash transactions.
When deducting alimony, the IRS will pay attention to whether reporting is consistent. This is relatively easy for IRS officials to detect since those making such deductions need to also report the Social Security number for those receiving the alimony payments.
Some taxpayers will report expenses in round-dollar amounts rather than to the nearest dollar. For example, a taxpayer may try to suggest all of the expenses are either $50 or $100. The IRS will be suspicious of such reporting.
Don't Agree With The IRS Audit? Maybe It's Time For an Audit Reconsideration
Reconsideration is, in some ways, an appellate process. You are asking the IRS to “reconsider” their previous determination of your tax liability. Reconsideration is most often filed by people who:
Reconsideration is also helpful for people who have new information that wasn’t available at the time of earlier IRS proceedings or tax return filings. Remember, staying organized and keeping all of your documents in order is a must. Consider keeping a folder or file handy so that you’ll be prepared for the tax season.
- Some decide to request an official audit reconsideration, wherein the IRS reevaluates a previous audit result, including a reversed tax credit or additional tax that has yet to be paid.
- Taxpayers usually make such requests when they disagree with the outcome of the audit.
- Taxpayers who do make such requests then need to provide information about the issue at hand that was not included or considered during the initial audit.
- They may also invoke this process if the IRS made an error in the audit or when a substitute for return (SFR) is contested.
How To Get Help With Reconsideration Requests
If you find yourself in a situation like this you may feel very frustrated. The IRS and taxes, in general, are a confusing process.
It is totally normal for people to move from their previous residence or disagree with the results of a prior tax assessment.
In the case of one of our clients, the IRS would only send her documents to her previous residence where she could not attain them.
The IRS offered only two options, to send her documents to her previous residence or access online via her credit card. Our client only had an American Express Credit Card, which the IRS does not take.
Unfortunately, our client could not receive her documents due to this situation. We helped her throughout the entire process so that she could be reconsidered by the IRS due to these unique circumstances.
Everyone has a different story, but you don’t have to go through this alone or feel bogged down by the IRS wait time where you endlessly wait to reach a real human.
Are you not even sure these IRS humans exist?
Don’t worry, we have you covered. Reconsideration may be the best way for you to resolve your disputed tax liability.
Only you, working closely with an experienced tax attorney, can decide which course of action will yield the best result for your unique financial situation.