In 2020, prior to the pandemic, the IRS released that they would target high-wealth taxpayers for audits. Per Accounting Today, “effective June 27, 2022, the IRS will begin conducting field examinations in person again.” In the past month we at ADKF have witnessed a drastic increase in the amount of IRS notices, including audit notifications. The increase in these notices can be attributed to several reasons, some of which are the following:
- Almost 3 years ago, the pandemic forced the IRS to shift to working remotely and temporarily closing facilities, which caused a major backlog of unprocessed returns. Per the National Taxpayer Advocates midyear report to Congress, the IRS still has a backlog of unprocessed paper tax returns of 21.3 million.
- We have also seen notices related to payments not received because they are sitting in unopened mail or otherwise lost in the mail. We started encouraging our clients to pay electronically to avoid the mail room issue but soon realized when the payment is made by the spouse not the primary taxpayer the payment is not automatically credited to the joint account thus requiring a call to the IRS to correct.
- Incorrect address on file: Per Rev-Proc 2010-16 “When a notice or document is sent to a taxpayer's ‘last known address,’ it is legally effective even if the taxpayer never receives it.” Therefore, filing a Change of Address Form 8822 (8822-B for business) is important.
Here is what you can do
- File timely and e-file if possible – this is always good advice but especially in these times
- Make payments electronically on irs.gov/payments – be sure to do so in the primary taxpayers Social Security number
- Respond to all notices – The IRS collection system is automated and without requesting a collection hold, the situation will likely keep progressing.
- Timely respond to notices – all notices including audit notifications have a reply by date. It is vital to comply with that date or the situation escalates.
- File Address changes with the IRS – We recommend filing a Form 8822 (or 8822-B for Business) to report any change of address. This will ensure that the IRS has your current address on file even for prior years, so you receive any notices they send.
So, you may be asking, how can ADKF help me with my IRS related issues? Unlike most firms, ADKF has a department that is dedicated to handling IRS related issues, including notices and IRS audits. It is our policy at ADKF is to have a Form 2848 Power of Attorney (POA) on file with the IRS for every client. We have the box checked to receive communications so we will receive a copy of any notices and can ensure deadlines are met even when clients are out-of-town or otherwise did not receive their mail. This added layer of protection is a customer service we at ADKF are happy to provide. Another way we help our clients, we have a Department of Tax Controversy to handle IRS related issue, as well as other state tax related issues. We are able to assist our clients as well as referrals from other CPA’s without the capability to handle Tax controversy issues. We have multiple CPA’s and EA’s (Enrolled Agents) in our Department of Tax Controversy that have the knowledge and expertise to handle you tax controversy needs. Some of the services our Tax Controversy Department offers at ADKF are the following.
- Audit Representation
- Notice Responses
- Penalty Abatement
- Collection Issues
- Sales Tax Research
- Sales Tax Mock Audits
Contact us to see how ADKF can help you today!
Links/Resources:
- Tax Controversy | ADKF
- 'All hands-on deck': IRS shuffling workers to cut giant mail backlog
- National Taxpayer Advocate: Midyear Report - Backlog of Unprocessed Paper Tax Returns
- Tax Compliance Controversies on the Rise
- IRS.GOV Rev-Proc 2010-16