The IRS recently announced that it has begun conducting correspondence audits of employers that took the 6.2% Social Security tax credit authorized by the 2010 Hiring Incentives to Restore Employment Act. Those employers may want to be extra vigilant.
The Treasury Inspector General for Tax Administration (TIGTA) has concluded that the IRS’ correspondence audit program remains error-prone, and that those errors affect taxpayers’ rights.
The IRS conducts more correspondence audits than face-to-face audits, which are more resource-intensive. According to TIGTA, IRS employees often don’t follow established procedures and guidelines when processing correspondence submitted by taxpayers. It found specific problems in the following areas, which the IRS has agreed to improve:
- IRS employees failed to stamp correspondence as received. TIGTA: Missing date stamps mean the IRS can’t ensure a timely response to the taxpayer.
- Auditors didn’t contact taxpayers when additional information was needed. TIGTA: Additional taxes may be assessed erroneously.
- The IRS’ computer system wasn’t updated within five business days after taxpayers’ correspondence was received. TIGTA: When correspondence is entered late, IRS employees who work the toll-free phone lines can’t advise taxpayers that their correspondence has been received and is being considered.
√ KNOW YOUR RIGHTS: Correspondence audits are supposed to run on strict guidelines. For example, auditors must evaluate your correspondence and take the next action within 30 days after receipt. According to TIGTA, taxpayers experienced delays ranging from the minuscule (two days), to the substantial (107 days).
Strategy: Audits won’t be invalidated because IRS employees didn’t do their jobs in a timely manner. However, to ensure that the guidelines are being followed, keep track of what you send to the IRS and when you sent it. Confirm that auditors have considered all of your correspondence before they close your case.