This isn’t your grandfather’s IRS audit

income tax audit stamped on IRS form 1040

The changes in the tax code got a lot of press in the last couple of years. The changes have caused confusion, frustration and stress for a lot of taxpayers across the country and here in Missouri.

However, those changes are not the only ones that went on in how the IRS does business. You may not have known that since the start of the decade, the agency has made changes to the way it does audits. As the end of the year makes people think about filing their taxes next April, you may want to know what those changes are in case you receive something in the mail from the IRS.

What do audits look like now?

Between 2010 and 2018, the number of audits the IRS conducted dropped by almost 50%. The agency just doesn’t have the resources it used to so it had to adjust. What this means for you is that you are more likely to receive notification of an “audit by mail” rather than a knock on your door from an IRS agent who wants to sit down and scour your records in person. In fact, the agency only conducts about 25% of audits that way these days.

The other 75% are done by mail. If you receive a notification from the IRS that the agency wants to audit your records, make sure you read it carefully since it will probably require you to respond by mail. Don’t sit back and wait for someone to call and schedule an appointment with you. Far too many people end up owing additional taxes because they failed to respond to these notices, and by default, they agreed with the IRS’s assessment.

What could trigger an IRS audit these days?

Someone claiming the Earned Income Credit triggers approximately half of the audits done today. For some reason, the IRS tends to think that people use this credit when they shouldn’t. Many government officials think the agency is unfairly targeting lower income families since they are the ones who use this credit most often. It’s not clear why the IRS focuses on this particular issue as closely as it does.

Unfortunately, many people do fail to respond to mail audits, and many of them may be the struggling families who take advantage of the EIC and cannot afford the additional assessments imposed by the IRS. In fact, around two-thirds of people who receive these notices respond even though only around one out of every five people would agree with the agency’s assessment.

What can you do?

If you do receive a notice regarding an audit by mail, take it seriously. You do have rights and options. You do not have to simply accept what the IRS says you owe. It may be beneficial for you to discuss the matter with a tax attorney in order to determine the best course of action for your circumstances.

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