Leander, TX: What To Do If You Receive an IRS Audit Notice

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I am an Enrolled Agent, a Federally Authorized Tax Practitioner, who represents taxpayers in Leander and central Texas who owe the IRS, have unfiled tax returns, are being threatened with collection enforcement, or similar issue.

Each year, the IRS sends out millions of notices and letters to taxpayers. The IRS is increasingly performing fewer in-person office audits and instead conducting correspondence audits. This requires fewer IRS reprentatives and resources resulting in a larger net being cast over the American taxpayer. 

Furthermore, the IRS is increasingly using high-tech, enlisting the use of artificial intelligence to discover discrepancies between filed tax returns and information reported by 3rd parties. Through FATCA legislation  and agreements with most of the civilized world, the IRS is now in possession of financial information being provided from overseas financial institutions, including crypto or virtual currency databases.

A new question was added to the 2020 Form 1040, “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in virtual currency?” 

Failure to accurately answer this question could trigger an audit and penalties.

Ultimately, a taxpayer may receive a notice such as a CP2000, identifying potential mismatches or errors between a filed tax return and information reported to the IRS by 3rd parties.

Receiving any correspondence from the IRS may trigger stress and panic even though you believe you've been completely honest in your reportings. 

In many cases the IRS notice is not entirely correct. Keep in mind that it was generated by a computer with a set of instructions, not necessarily handled by a person.

There are a number things you should and should not do with an IRS notice.

  1. Don’t panic. 
  2. Open the correspondence and read it in a timely manner (most notices allow 30 days for a response.)
  3. Don't ignore the correspondence. 
  4. Make sure to keep copies of your response and any documentation used in the reply.
  5. Contact a tax professional if you are not sure how to respond to the notice. An Enrolled Agent is federally authorized to represent any US taxpayer before the IRS.
  6. The IRS does provide "customer" support but training and experience varies within such a large tax collection agency. Ultimately, IRS personnel will attempt to do what is in the best interests of the government.

The IRS scaled back on correspondence audits during 2020 at the heighth of the COVID-19 pandemic and are in a "holding pattern" for the first half of 2021 however they have already indicated that both audits and collections enforcement is going to increase sometime during the year.

As a result, you may find yourself a recipient of an IRS notice in the near future.

Navigating your way through an IRS notice, especially a correspondence audit, can be challenging and confusing

If you or someone you know owes the IRS, has unfiled tax returns, or other unresolved IRS tax problems, please feel free to contact me at either (512) 592-7720 or by email at peter@thetaxproadvisor.com.

Peter N. Mitchell, EA

Tax Pro Advisor, LLC

605 Las Colinas Dr.

Leander, TX 78641

Ph. 512-592-7720





Comments (3)

Paddy Deighan MBA JD PhD
federalfinanciallawgroup.com - Vail, CO
Paddy Deighan J.D. Ph.D

timely blog..one of my tax clients just received a NoD from the IRS and she had a compete evacuation of her bowels ahahahahahah ...well not funny for her but yoru blog caught my attention!!

Feb 21, 2021 02:34 AM
Richard Weeks
Dallas, TX
REALTOR®, Broker

Great information, thanks for sharing. I hope you have a great day.

Feb 21, 2021 02:40 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Great information to share with us here in the rain.  I hope I am not on there list  hahahaha

Feb 21, 2021 08:21 AM