Responding to an IRS Audit Letter

Dedicated to providing comprehensive support for taxpayers, Doonan Tax Services offers both return preparation and audit response. Doonan Tax Services stands ready to represent clients in IRS audit proceedings and to help clients prepare for those proceedings. 

Although the average risk of a federal tax audit is only 1 percent, they may happen if the IRS believes that it needs to re-examine a taxpayer's return. For the taxpayer, this typically means that the IRS needs to verify the accuracy of income and expenses. 

The IRS provides audited individuals with information about which return it is auditing and what information it needs to examine. It also specifies whether the audit will take place by mail or in person. Experts recommend that those facing in-person audits either bring or send tax professionals, as the IRS representative may ask questions that are beyond the average taxpayer's knowledge base.

A professional can also help the taxpayer gather the appropriate documentation, particularly if written evidence on a particular topic is difficult to identify. Copies of original documents are ideal, although a taxpayer may be able to provide a detailed description of the rationale behind a particular figure. For example, if the audit is regarding a taxpayer's business deductions, the taxpayer may be able to present a sample of what his or her business life entails.

Verifiable documentation tends to be best, however, and this may involve reaching out to third parties. Charities may be able to provide written records, though some deductions are more challenging to prove. In such cases, the advice of a representative can be invaluable in helping the taxpayer to make his or her case.

Year-Round Strategies for Tax Planning

Founded in 1981 and expanded in 2016, New York City-based Doonan Tax Services provides individualized tax preparation services to hard-working taxpayers across the tri-state area and beyond. Open throughout the year, Doonan Tax Services is committed to helping its clients protect their assets at all times.

Many people wait to think about taxes until the deadline is looming, but a bit of advance planning may lead to significant savings. For example, because traditional 401(k) and individual retirement account (IRA) plans offer pre-tax contributions, some taxpayers can reduce their taxable income by channeling money into these accounts throughout the year. Depending on the taxpayer's income and employment situation, some IRA contributions are tax deductible.

Contributions to employer-based health savings accounts may be not only tax deductible, but also effective in offering tax-deferred earnings and tax-free withdrawals for any qualified expenses. For employees, higher contributions to these accounts can not only lower tax bills in immediate but also provide additional resources for future medical needs.

Experts also advise taxpayers with employment income to evaluate withholding amounts on a regular basis. By analyzing the amount withheld from each paycheck and comparing that to expected tax responsibilities, employees can determine whether they are allowing their employers to take too much or too little from their take-home pay. 

In cases where too much is being withheld, an adjustment can give the taxpayer more to invest and place into tax-efficient vehicles throughout the year. A correction of underwithholding, however, can save the taxpayer penalties in the following tax year.