The likelihood for an increase in the number of tax audits that the IRS conducts over the next few years is looking strong. If a person receives notification that they are one of the unfortunate people selected for examination by the Internal Revenue Service, that person should immediately hire a professional to represent them in the examination process with Uncle Sam. Getting professional help has always been important in regards to the IRS and the auditing process. However, this advice is even more important now because of the uncertainty about the expiring and extending tax provisions.
The potential increase in tax audits is related to the uncertainty that people have with the IRS code as a result of the government’s inactivity on many of the federal regulations, rules and provisions. Much of the uncertainty comes from the Bush tax cuts and the questions about when many of those regulations will expire. Because there has been a great deal of political volleyball over the regulations, people are not sure what provisions they can take or not take on their federal returns. This doubt creates some of the problems because people often either over claim or under claim items on their federal returns, and that is likely to cause them both to be wrong. Thus, the inaccuracy of people’s federal returns go up and that invites tax audits by the IRS.
This uncertainty has drawn the attention of the National Taxpayer Advocate Service, which has uttered some concern about it recently in their mid-year report to Congress. When there is enough ambiguity and doubt about what is acceptable for people to take or not take on their federal returns, then there will be an increase in things that will be wrong on the returns. Some people will use this time of uncertainty to over reach on the things that they include on their federal returns. Meanwhile, other people will not reach far enough and they will leave things off of their returns for which they are entitled to take on them. Other people won’t adjust at all, so their returns could be wrong as well. All these factors point to a real potential for a rise in tax audits in the coming years.
Another area of concern that the Advocate Service has now focuses on examinations. Their concern relates to what they see as a rising number of automated examinations and other adjustment procedures that can change the items on people’s federal returns. The problem with this automated examination approach is that the IRS changes things on people’s returns because they have deemed them wrong. That doesn’t generally allow people to challenge the automated changes that the IRS made like they would in the regular audit process.
Tax audits are certainly no fun at all for people, but the one thing that is good about them when they happen is that they open up a series of rights and procedures for people. So the concern is that when the IRS increases the automated examination changes, it then limits people getting their fair chance at fighting the changes if they disagree with them. All the more reason to immediately hire a professional so a person stands a much better chance of preserving their rights and winning on them.