My sister just got audited by the IRS.Now what?

Question

My sister just got audited for the very first time by the IRS. She became a homeowner a few years ago,so her itemized deductions got therefore a bit higher.No big deal,she has pretty much all the paperwork she needs to prove it.So,the IRS gives her the option to either pay or prove otherwise,logically.So,now she afraid that by sending in all the copies,she might owe more in the end instead of just paying what she apparently owes.Is that even possible? Also,why does she have to pay penalties,since she didn't know nothing about until recently? Anyone here know anything about tax audits and is there like a hotline or a website where they answer such questions? Thank you for your help.

Answer 1

If she can prove, what they are asking her to prove. Then she should do that.

If she can't prove it, she will have to pay!

If she can only prove part of it, she will most likely have to pay the part she can't prove.

It is no big deal; thousands upon thousands of people get audited all of the time.

All they want to see is the proof of what she is claiming is true.

If they can't see that, then all they want to see is the cash with penalties and interest.

They really don't want to put anybody in jail.
(Even though that was the only thing that the Federal Government could ever pin on Al Capone.)

They will work with you these days. They will either work out a suitable payment plan or offer a reduction for prompt payment especially if the owed amount is higher than her total assets.

She is lucky!
In the old days they would have confiscated her house and anything else of value she owned. They would have sold it and then asked questions later.

If you could prove that you were right and they were wrong.
Only then, would they issue you a tax credit for the next year.

Although, it was rare that you would ever see or get your belongings back again.

After it was found that the IRS was causing people to Commit Suicide they were forced to adopt a kinder more gentle way of doing business.

Tell your sister not to worry. Her life will not change that much either way. Also the IRS employees and agents are usually very pleasant to deal with these days.

Isn't this something in a Country that went to war and won their independence against England because they did not want to pay taxes on tea?

P.S.
Tell her not to send them anything that they do not specifically ask for.
Also she will most likely have to meet with an agent in person, at the that time the agent will let her know what documents he needs to see and will give her a month or so to come up with them.

I wish her the best of luck.

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Answer 2

If she can prove all of her deductions, she won't have to pay any additional taxes or penalties. If some of them are disallowed, than she'll owe the additional tax on that and possible interest and penalties, since she wouldn't have paid the proper tax when she was supposed to.

If in the course of the audit, some other items turn up that appear unwarranted for deductions, then it's possible that her taxes could increase more. But if everything was legit, she shouldn't be worried about that.

Answer 3

She should send the copies of her documents supporting her deductions taken on her return. If she claimed something she shouldn't have or miscalculated something, then she could owe more tax (and penalties and interest). NEVER be afraid of the IRS as long as you file your return correctly.
The law requires that taxes are to be PAID by 4/15. Any amounts paid after that are subject to late payment penalties and interest, which is what your sister is being charged.
DON'T pay it yet. Send in the documentation first. Consult a tax professional if she has any questions or needs help.

Answer 4

I don't think she got audited; she probably got a CP2000 form which is in error about 65% of the time. If she has paperwork to support her itemized deductions then she should keep the originals and only send copies; as they lose the first batch about half the time and you have to repeat the process. Remember that in this day and age we are dealing with idiots and computers in all areas, so just play the game. Your sister will prevail.