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IRS Audits: Top Six Field Audit Issues

Some field audits last a couple of hours and are wrapped up that day. In extreme cases, a revenue agent may spend hundreds of hours over a year or two conducting a field audit. The typical field audit, however, involves an interview with the revenue agent that lasts an hour or two, followed by the revenue agent spending ten to 15 hours reviewing your records. Introduction The vast majority of people who are subjected to a field audit...

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The IRS Appeals Protest Letter

IRS appeals rules differ, depending on the amount of taxes you are disputing from an audit. It's important to know at which thresholds the IRS separates requests. Smaller cases allow for a less formal appeal request while larger cases require more in-depth communication. Below, you'll find an overview of these two case determinations and how the IRS assesses them. Under $25,000: Small Case Request If the total amount you’re disputing for any one tax year is not more than...

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Tax Court: How the IRS Handles ‘Regular Cases’

If you want to contest in tax court an audit outcome of over $50,000 for any one year, your case will be considered a regular case. Most people hire a tax pro to represent them when arguing a regular case. A Trial in Tax Court If your case reaches the trial stage, the judge may not be that patient with a taxpayer representing him- or herself. Strict court procedures and rules of evidence apply. After the trial, you...

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Should You File a Tax Return While Under Audit?

Here’s one way to minimize the expansion of your audit: Don’t file a tax return while an office (read here) or field (read here) audit is in progress. This rule does not apply if the IRS is conducting a correspondence audit (read here). If you file your return during an office or field audit, the audit is likely to be expanded to include that return. When April 15 rolls around, file a request for an extension to October...

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Reviewing the Automated Adjustment Notice

Money magazine estimates that between 25% and 50% of automated adjustment notices are erroneous. A common IRS mistake is not finding an income item that was reported elsewhere on the tax return. This can result in incorrectly misreported income, as illustrated below: EXAMPLE: Hilary reported $457 of money market fund income as interest. The financial institution labeled it as dividends in its report to the IRS. While dividends are listed right after interest on the IRS form, the...

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