Few things in life are more unsettling than getting a letter from the IRS — especially if you don’t think you did anything wrong.
The recent Inflation Reduction Act allocated nearly $80 billion to the Internal Revenue Service to close the enforcement gap between what the IRS is collecting and what it should be collecting. Right now, even as you are reading this, the IRS is mass recruiting people with little finance or tax experience as junior auditors. And it’s giving them small-business tax returns to cut their teeth on.
But don’t panic. Most of the time, there’s nothing to worry about. In the vast majority of cases, either:
— The IRS computers picked up inconsistent, incomplete or contradictory information on your tax return (for example, you reported gross income for your business that was less than the total amount reported on the 1099, W-2 and K-1 forms you attached to your return) and the IRS wants more information to see if you calculated your tax correctly.
— Your return has been selected for a “random” audit based on any number of factors (most commonly, being too aggressive in taking travel, entertainment and other “lifestyle” deductions that are difficult to support without tons of backup).
When the IRS sends you a letter, here’s what you do:
FIRST, CONTACT YOUR ACCOUNTANT AND SEND THEM THE LETTER
If you used an accountant or other paid tax preparer, you should scan and email the letter promptly to him or her. They are extremely well informed…
