The IRS plans to conduct more “correspondence audits” than it has in the past because the Service is finding that these audits produce more revenue than office and face-to-face audits. Correspondence exams can be as simple as asking about a tax return data discrepancy, correcting an error on a return, or asking for a missing form. But the IRS is also using these audits to focus on other issues, including such things as employee business expenses, the earned income credit, charitable deductions, and the tax credit for buying a home.
As states struggle with budget issues, they, too, are getting more aggressive in collecting taxes. One particular state issue is “use taxes.” Like sales tax, the use tax is assessed on items you purchase out of state and use in your home state. If you purchase items on the Internet from an out-of-state company or buy from Canada or overseas, you may be contacted about use taxes.
If you get a letter from the IRS or the state, contact us as soon as possible. Don’t ignore the correspondence because it will not go away. Let us know about the notice when you receive it. It is much easier for us to work with agencies and resolve the problem quickly if we’re involved from the beginning.
Do you have a question or need help with an IRS or state tax notice? Call our office a call today.