I then quickly receive a tax notification from the IRS.
On occasion, I get a lot of IRS tax notices.
Dealing with these IRS tax notifications is really stressful.
The needs of the IRS are initially unclear.
The paragraphs detail numerous numbers and estimates for tax problems, large fines, and interest charges that they assert I owe.
The tax letters from the IRS are extensive, averaging six to seven pages. The lines are set very near to one another.
There are ongoing restrictions on response times.
I can hardly understand what the IRS is requesting. How can I attempt to explain and defend myself?
Dear “Marty,”
Let me explain how IRS tax notices work.
To start, know that you are not alone.
According to the IRS Taxpayer Advocate, you and many other taxpayers experience problems receiving IRS tax notices or “correspondence audits.” The IRS notifies the taxpayer in writing that their return has been selected for inspection. The IRS then conducts the audit by letters, as the term implies.
In the audit letters, the taxpayer is not given a point of contacts, such as a direct phone number or the name of an IRS agent. Instead, a phone number for all communication audits is included in the letter.
If the taxpayer doesn’t respond to the initial contact letter, the IRS usually doesn’t make any further attempts to get in touch with them. As an alternative, it will make suggestions, publish a Statutory Notice of Deficiency, and then end the matter. The sole option accessible to taxpayers who wish to speak with someone about an audit is to call a representative on a toll-free line.
The IRS’s correspondence audit technique is meant to promote efficiency, but it can be challenging for our nation’s most vulnerable taxpayers to cope with these audits, which can have a detrimental impact on both individuals and the IRS.
Correspondence audits may be difficult for low-income taxpayers.
With the use of automation, the IRS can operate efficiently and conduct a significant number of correspondence audits with a small team of examiners. Cases that have a single year and one issue, which the IRS believes it can readily resolve by letter, are handled using the correspondence audit technique.
In the fiscal year FY 2019, 1,094 audit examiners conducted 559,369 correspondence audits.
The IRS considers correspondence audit problems to be “non-complex.” However, low-income taxpayers who are the subject of an audit might disagree.
Low-income taxpayer correspondence audits usually focus on the Earned Income Tax Credit (EITC) and other refundable credits. Complex issues such as a taxpayer’s income, marital status, relationship to dependents or children claimed, as well as the EITC and other refundable credits, are usually examined in these audits.
These audits may be challenging for low-income taxpayers, who usually have little English proficiency and are more likely to have lower literacy rates.
The greater prevalence of unbanked households among low-income households may have an impact on taxpayers’ capacity to demonstrate their income and expenses.
They frequently move around more, which negatively affects a taxpayer’s ability to quickly receive and respond to IRS correspondence.
The likelihood that low-income children will live with a single parent, in a multigenerational household, in a cohabiting household, in a family with at least one non-biological child, or in a shared custody arrangement makes it much more difficult for low-income taxpayers to apply the “qualifying child” rules.
Taxpayers with low incomes frequently have trouble contacting the IRS for help.
Low-income taxpayers are most impacted by correspondence audits.
Moreover, half of the individual audits conducted by the IRS in FY 2019 were on taxpayers with total positive incomes under $50,000, with 82% of these low-income taxpayers claiming the anti-poverty EITC.
Ninety-two per cent of these audits were conducted via mail.
If the tax notice has been returned to the taxpayer, the IRS views them as being non-responsive.
The tax problem gets worse since the IRS allows the tax overpayment, penalties, and interest costs to accumulate.
Communication problems affect low-income taxpayers.
Eighty-two per cent of these audits of low-income individuals are completed by the IRS’s Wage and Investment (W&I) Division.
Correspondence audits and assistance requests are both tasks assigned to IRS W&I correspondence examiners.
However, the IRS focused the majority of its W&I correspondence audit resources on performing audits. Only 4% of the budget was used to respond to the phone calls that these audits generated.
Poor IRS telephone service makes it challenging for many low-income taxpayers to get the help they need to abide by their audit notices.
There is limited interpersonal interaction and low-income taxpayers are rarely represented during the correspondence audit process.
Low-income taxpayers are the population most susceptible to individual audits, the least represented by tax professionals, and the most reliant on IRS correspondence audit toll-free lines for assistance. Although a tax professional completed the returns for 55% of low-income taxpayers audited in FY 2019, only 3% of these taxpayers received professional assistance during the correspondence audit process.
On these audits, the IRS spends less time and has fewer chances to develop personal relationships.
Low-income taxpayers frequently disregard IRS correspondence. Thus, the lowest agreement rate, the highest no-response rate, and the highest proportion of cases assessed by default are seen in low-income taxpayer correspondence audits.
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Eligible taxpayers can get assistance from the AACA LITC (Asian American Low Income Taxpayer Clinic) with correspondence audits. Taxpayers are represented by the AACA LITC, a company independent of the IRS, in audits, appeals, and disputes affecting the collection of taxes before the IRS and in court, including the Tax Court.
Low-income or English-speaking individual taxpayers are represented by, educated about, and advocated for by the Qualified Tax Experts at AACA LITC (ESL).
