While it’s true that most Georgia residents do not look forward to the yearly ritual of filing and paying taxes, at least there’s some satisfaction, and perhaps a degree of relief, when it’s over and done for the year. However, for those who receive the dreaded audit letter, the real problems may just be starting. Not every audit, however, is cause for alarm. The best way to be prepared is to understand the basics of what an audit is and the best manner in which it can be addressed.
One thing to be aware of is that the only way the IRS initiates an audit is through the mail. Secondly, while an audit typically involves an issue with that particular return and taxpayer, it may alternatively be the result of a random selection or computer screening or due to an irregularity of a tax return from a related party, such as a partner or investor. Tax experts point out that the IRS most typically conducts either a paper audit through the mail, consisting of all documents filed plus requested supporting documentation, or a field audit, in which agents come to the taxpayers home or place of business to gain access to the taxpayer’s records.
An audit can end in one of three ways: no change, agreed or disagreed. No change means everything has checked out, agreed means there is a change the taxpayer will comply with and disagreed means the taxpayer will contest the matter. Even where the taxpayer has disagreed, there are potential outcomes that may not result in owing the full amount as indicated by the initial audit result. Potential results, depending on the individual facts and circumstances of the case, include installment agreements, offer in compromise, penalty abatements or reclassification as not collectible.
An audit by the IRS or the state is a serious matter and securing legal representation may be advisable. An experienced tax lawyer might be able to work to protect the rights so of the taxpayer.