{"id":875,"date":"2015-08-20T16:04:54","date_gmt":"2015-08-20T21:04:54","guid":{"rendered":"https:\/\/taxprocenter.proconnect.intuit.com\/?p=875"},"modified":"2021-05-18T11:53:16","modified_gmt":"2021-05-18T16:53:16","slug":"irs-audits-are-on-the-rise-how-to-help-your-clients","status":"publish","type":"post","link":"https:\/\/accountants.intuit.com\/taxprocenter\/practice-management\/irs-audits-are-on-the-rise-how-to-help-your-clients\/","title":{"rendered":"IRS Audits Are on the Rise: How to Help Your Clients"},"content":{"rendered":"

No one wants an audit \u2014 not you and not the taxpayer. However, audit numbers are on the rise, and the shift is affecting the lower income audience in a significant and somewhat disturbing way. It has to do with an IRS concept of \u201creal\u201d and \u201cunreal\u201d audits, and no matter how skilled you are as a tax professional, many of the flags are computer-generated and beyond your control. However, you can offer your clients some support against this challenge. We\u2019ll tell you where the shift stems from, what the statistical repercussions are, and how you and your clients can avoid getting dragged into the time-consuming ordeal of responding to an audit.<\/span><\/p>\n

Since 2010, the IRS has experienced significant budget cuts and now has less than half of the staff in its enforcement group than they did in 2010. As a result, while the IRS focuses its face-to-face audit resources on more affluent individual taxpayers, there has been a magnified reliance on automated audits that are triggered by computer data differentials, including math errors, unfiled returns and income discrepancies where income on a taxpayer’s return doesn’t match income reported to the IRS by third parties, such as financial institutions and employers. The IRS does not consider these automated audits to be \u201creal\u201d audits; instead, it calls them tax adjustments. According to the Treasury Inspector General Tax Administration, approximately 5 million of these automated audits are expected yearly.<\/span><\/p>\n

The problem is that when the IRS doesn\u2019t classify these adjustments as audits, a number of taxpayer rights are not triggered. (See IRC Sec. 7605(b).) To complicate the situation, the largest percentage of \u201cunreal\u201d audits focus on those with income of less than $100,000, and more than half of them are within the population that reports under $25,000 income (source: R&G Brenner Income Tax) Many in this population are unable to afford representation in resolving their disputes and may not even know when their rights are being violated. Thus, they either pay the adjustment whether it is correct or not, ignore paying the adjustment which racks up penalties and interest, or drag themselves and their tax professional through the arduous task of refuting the adjustment.<\/span><\/p>\n

With so few IRS tax professionals to answer questions, taxpayers typically have to wait a minimum of 6 \u00bd weeks to receive a response from the IRS. On that timeline, these \u201cunreal\u201d audits can suck up inordinate amounts of very real time and money.<\/span><\/p>\n

Audit Assistance, part of the Client Benefit Suite, is a program designed to help save you and your clients time by providing your clients with support in the event that the IRS audits their tax return or denies their credits.<\/span><\/p>\n

The program provides personalized assistance in the event of an IRS Audit:<\/span><\/p>\n