You file your taxes hoping you did them right and you don’t get that dreaded IRS audit letter. The word “audit’ strikes fear in most every tax payer in Austin, Texas, but audits aren’t that common. Even if you get an audit, most taxpayers don’t know you can appeal them.
Why returns get audited
Audits are conducted if the IRS auditor finds a red flag in your return. For example, a common red flag is not reporting cash income from an employer. Higher incomes also raise a red flag with the IRS, especially a sudden jump in income. The percentage of audits for higher income above $1 million increases to 10%.
The IRS compares the deductions you take to the average taxpayer in your income bracket. Reporting deductions you didn’t earn or reporting too many business deductions triggers the IRS.
Filing an appeal
You may handle audits on your own or get legal assistance for IRS defense and appeals. However, it is recommended to get help when you owe $25,000 or more. If you appeal cases between $2500 and $25,000, make the title of the appeal “small case request.”
The IRS commonly sends you a first notice letter, which informs you they found some issues and need clarification. If you took large deductions, be prepared to explain and backup why you took them.
If you don’t respond to this letter, you should get another letter telling you how to appeal with a 30-day deadline. In the protest letter, include your name, address, phone number, a statement of wishing to appeal, tax year, and list items you are protesting. Include a statement you declare this to true under penalties of perjury, sign underneath it, and keep a copy of the letter.
While you may extend the 30-day deadline, never ignore audits. You typically have 60 days to prepare for the hearing, which gives you time to devise a defense.