Audits By Mail – What to Do

The IRS conducts many types of audits each year to verify income and expenses claimed on tax returns. Many of these audits are conducted by mail.

If you receive a letter saying that the IRS is auditing your tax return, read the letter carefully. It will explain the issues involved, and outlines the types of information you need to send in. The IRS may ask for an itemized list of expenses or deductions.

If you’re not able to verify an amount claimed, explain how you determined the amount claimed on your tax return.

Attach photocopies of your original documents to your IRS letter and mail it back in the enclosed envelope. You can also fax it back, but must include your name and SSN on each page. You must reply within 30 days.

After the IRS reviews your reply, they will send you another letter either accepting your information or proposing changes to your tax return. If changes are proposed, the letter will include Form 4549, “Income Tax Examination Changes”, which includes the proposed changes. It will also include Form 886-A, “Explanation of Items”, which explains why your documentation was not accepted.

If you understand and accept the proposed changes, sign and date Form 4549 and return it with your payment. If you pay your bill in full, you’ll reduce the amount of penalty and interest you owe.

If you disagree with them, you have the right to appeal before the IRS and within the courts.

Publication 3498-A, “The Examination Process (Audits By Mail)”, is available on IRS.gov.

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About cozbycpa

Heather L. Cozby is a CPA on the South Shore and Cape Cod. The managing partner of Cozby & Company, LLC, Heather has the resources and experience necessary to provide quality professional services on a timely basis and at a reasonable cost. She specializes in tax planning & preparation; audit, review & compilation services; management advisory services; bookkeeping; and accounting. Her unique niche is in working with homeowners’ associations and condominium trusts, advising with rental real estate, and providing outsourced financial consulting for mid-sized companies. She is more entrepreneurial than most accountants, and offers the best of both worlds - providing the services of a larger firm while retaining the ability to connect with her clients on a personal level.
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