What Should You Do if the IRS is Auditing Your 2020 Income Tax Return?

While the Internal Revenue Service (IRS) extended Tax Day to July 15 and offered various other forms of relief to taxpayers in response to the COVID-19 pandemic, the nation’s tax collector is still vigorously enforcing taxpayers’ legal obligations. One of its primary means for doing so is by conducting audits, and many New Jersey residents and businesses can expect to face audits of their 2020 income tax returns.

If you (or your business) is being audited by the IRS, what do you need to know? Here are some important considerations from New Jersey tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group:

5 Important Considerations for Responding to an IRS Income Tax Audit

1. You Cannot Ignore the IRS

First and foremost, you cannot ignore the IRS. If you are facing an audit, you need to respond, and you must see the audit through to its conclusion. Ignoring an IRS audit can be a costly mistake, and appealing the outcome of an audit can be far more expensive and time-consuming than dealing with the audit itself.

2. The Penalties for Tax Fraud and Tax Evasion Can Be Severe

If the IRS determines that you have underreported your taxable income or underpaid your federal tax liability, the consequences can be severe. Possible penalties include interest and fines, and the IRS can utilize various legal mechanisms to collect what you owe. If auditors find evidence of intentional tax fraud or tax evasion, they could refer your case to IRS Criminal Investigations (IRS-CI), and this could potentially lead to criminal prosecution in federal court.

3. There are Many Ways to Defend Against an IRS Audit

While the consequences of an IRS audit can be severe, it is also important to acknowledge that there are numerous potential ways to defend against an IRS audit. From providing substantiation to demonstrating that the auditors’ understanding of the pertinent provisions of the Internal Revenue Code (IRC) is flawed, an experienced tax attorney can utilize various strategies to help you avoid additional tax liability.

4. If You Cannot Pay What You Owe, You Have Options Available

If it turns out that you have underpaid the IRS, you have options available for managing your additional tax burden. Depending on the circumstances involved, you may be able to secure an offer-in-compromise or negotiate a settlement agreement that limits what you owe.

5. An Experienced New Jersey Tax Attorney Can Help

Regardless of the circumstances involved, if you are facing an IRS audit in New Jersey, a tax attorney who has specific experience handling IRS audits, investigations and appeals can help. If you are facing an audit and would like more information, we encourage you to schedule a confidential consultation at Thorn Law Group today.

Request a Confidential Consultation with a New Jersey Tax Attorney at Thorn Law Group

Our firm represents New Jersey residents and businesses in IRS audits, investigations and appeals. If the IRS is reviewing your 2020 income tax return, call us at 201-355-8202, email Managing Partner Kevin E. Thorn at ket@thornlawgroup.com or contact us online to speak with one of our highly-experienced New Jersey tax attorneys in confidence.