The number of tax return audits is likely to continue rising as the IRS beefs up enforcement, nearly doubling its tax law enforcement budget next year. In addition, the IRS is stepping up efforts to close an estimated $345 billion tax gap. In fact, last year, 1 in 99 individual tax returns were examined by the IRS, up from 1 in every 202 in 2000. More taxpayers also could be expecting the new "soft notice" warning letters as well.

 

To further complicate matters, the IRS is now issuing "soft notices" -- or warning letters -- to taxpayers seeking self-compliance. The soft notice asks taxpayers to review their tax returns and file amended returns if their original returns were in error. It also advises taxpayers that the IRS will carefully review future returns. Soft notices are sent in situations where the IRS received documentation showing income that appears to be under reported on the tax return and an audit notice was not sent.

The audit experience is complex. IRS jargon and tax law interpretation can be confusing and often frustrating for the typical taxpayer.
  

Impacted taxpayers range from individuals to home-based business owners to large businesses and everyone in between. No one is exempt.

Our firm cautions taxpayers who want to "go it alone" in dealing with an audit. Once someone receives a notice from the IRS, it's imperative to contact their tax or financial professional as soon as possible. The matter may be as simple as filing an amended return or sending supporting documentation. But in most situations, time is of the essence. Any delays could result in additional penalties and fees for the taxpayer.