IRS examination, ie 'Audit'

[brimic]

I just received a letter from the IRS stating that a return from 2 years ago has been rechecked, I had made a mistake, and now owe the IRS $600.

I looked back at my return, and sure enough, I had made a mistake. Strangely enough, that mistake had precipitated another mistake where I claimed the wrong amount on a deduction and when I refigured, I only owe them $200.

I want to call them today and get it sorted out, but I'm not sure if I'm going to be walking into possible pitfalls. Should I negotiate with them myself, or should I get a CPA in my corner?

[280plus]

It's worthwhile to get a CPA. Don't negotiate with them on your own. The CPA's know all the tricks or at least they are supposed to. Problem is a good CPA will probably cost you more than you can save so you'll have to wiegh that all out.

[The Rabbi]

I think you can submit a 1040C or somesuch for a corrected return.  Check the IRS website on submitting corrected returns.

[Leatherneck]

Don't sweat it. I had a similar situation some years back; they were absolutely correct in that I had not included one minor source of income. Pure oversight on my part--first time I used Turbotax, and the computer never even blinked at missing 10K of income!

I simply paid the extra tax plus interest and the IRS waived the penalty fee. Shouldn't be a big deal to file an amended return for the year in question, maybe including an explanatory note about the offsetting mistake. I'd be leery of any telephonic information or "deal."

TC

[Art Eatman]

Yeah, better to do everything on paper, keeping copis, and use snailmail.

For that small an amount, they don't get excited.

One time after a coin show in Houston, I was with some dealers for drinks and BS.  I'd invited a local lady friend to come to the show and she stayed for a couple of drinks.  guys were talking about what big deals they'd done, both at the show and at other times.  One finally asked her, "And what do you do?"  She answered, "I'm a special investigator for IRS."  (She was.)  He instantly responded, "And I'm the biggest liar in Oklahoma."

She went on to explain that she investigated guys whose back taxes were bigger than any money deal the coin dealer had ever mentioned.

, Art

[charby]

I got audited last year, my fault I had forgot to report some minor income. I'm always in a hurry to get my taxes filed before Feb 1, that I over looked it.

I got a letter from the IRS, looked at my paperwork saw that they were right and I set up a payment schedule with them and paid them off in 12 months. Then this summer the state sent me a letter and I was audited for the same thing, paid them off with my cash reserve. All is right in the world now.

Charby

[Paddy]

If you want representation, forget about the CPA's.  Their primary training is in accounting, not taxes.  See an Enrolled Agent http://www.naea.org/memberportal/
For a simple error, you won't need representation.  Did you fail to disclose some income that was otherwise reported to IRS?  Or did you take some deduction that was not allowed?  If a portion of the penalty is an 'underpayment penalty', you can file a 2210 and maybe mitigate it somewhat.

[280plus]

Riley

Are you telling me I should have an EA doing my taxes instead of a CPA?

and...

If so what do I need an accountant for? All he does is my taxes.

[Paddy]

Are you telling me I should have an EA doing my taxes instead of a CPA?

Not necessarily.  If your CPA is familiar with your tax situation and actually looks out for you, have him/her continue to prepare your returns.   Too often though, CPA's hardly look at, never mind actually prepare, the returns they sign.  Instead, they send out an annual 'organizer', which is a summary of last year's income and expenses, along with a questionnaire.  You fill out the boxes, which correspond to certain data entry fields in the tax software.  The entries are made by a clerk in the CPA's office, who then prints the tax return.  Unless they actually scrutinize the return and think about your particular tax situation and offer advice, they're providing no more value to you than Turbo Tax would for $20.

Was the error from two years ago something you failed to tell the CPA about?  Was it something he should have known and questioned you about before filing the return?  Was it information you gave him and he missed?

[280plus]

If your CPA is familiar with your tax situation and actually looks out for you, have him/her continue to prepare your returns.

Thanks, he does.

[brimic]

For a simple error, you won't need representation.  Did you fail to disclose some income that was otherwise reported to IRS?  Or did you take some deduction that was not allowed?  If a portion of the penalty is an 'underpayment penalty', you can file a 2210 and maybe mitigate it somewhat.

The error I made was that I didn't report income in box 10 of my wife's W2- her child care account. I also screwed up on the child care expenses deduction and didn't put the correct number in (too low of a number) the two errors offset eachother somewhat.  

I used Turbotax, that was the first year I claimed a child care deduction and the instructions were a lot more confusing at tht point in time than they are now to me.

The IRS did not assess me a penalty (yet) only the underpayed amount along with about 8% total interest.

[Paddy]

OK, a simple oversight.  The first letter gives 30 days to contest the the correction, I think.  If you still have the TurboTax on your computer, make the corrections and reprint the return.  If it agrees with the IRS correction, send them the money.  You should get a bill about 30 days after the first letter.