When you receive the "letter" from the IRS, you must not panic and you must not ignore it.
You may ask, "Why me"?
Let’s look at some reasons the IRS may question you:
Income – The IRS knows every 1099 you’ve received for interest, dividends, non-employee compensation and other sources of income. Their computers check that all 1099 income is properly included on your tax return. If their system can’t “match up” the amounts they think you should report, you will most likely get an IRS letter.
Deductions – Every year the IRS uses a computer program to calculate what is “normal” deduction based on a sample thousands of tax returns with different levels of income. Then IRS uses a computer program that assigns a numeric score to every individual income tax return after it is processed. Charitable deductions and unreimbursed employee expenses are just some of the deductions that will be scored. The higher the score, the higher the probability that an IRS examination will result in a change to your tax liability.
Reporting Patterns – Taxpayers with a Schedule C (self-employed) business come under closer scrutiny. The IRS expects you are in business to make a profit; they’ll want to know more if you’re showing losses several years in a row.
Random Selection – Sometimes there is no reason; you’re just picked.
The best defense to avoid the IRS is to have your tax return prepared correctly. But if you do get a letter, don’t panic. Remember you are entitled to representation, and to all legitimate deductions.
As soon as you receive the “letter”, let a tax professional such as Gary M. Kaplan, C.P.A., P.A. take control of the situation and find resolution.
You can receive your FREE consultation by calling 1 (866) 643-3560
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