No Change Letter, End of an IRS Income Tax Audit
An IRS income-tax audit can end with no changes, a fully agreed outcome, or unresolved issues that may proceed to appeal.
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An income tax audit is never a pleasant process but a skilled attorney who understands the tax laws can make the process much less painful and offer audit defense. You can also relax in that you are ensured that you do not overpay any taxes you may owe. Basically, an income tax audit can end in one of three ways. You can have a no change to the amount of taxes you owe, a fully agreed case where both sides agree on the amount of taxes owed, or a partially unagreed and fully unagreed case of what you owe. But what does that mean in plain English? Let us have a look at each possibility.
If, at the end of your income tax audit, the IRS issues a “no change” letter, then it is time to celebrate. What this means is that after looking over your returns, getting answers to their questions and noting no outstanding issues after reviewing all the documentation, they concluded that your return was correct and no changes are needed. Keep in mind that an income tax audit, at its simplest, is just like someone grading your term paper. Sometimes they mark it up and other times, all is well and you get an A. The IRS does not always find problems though it is rare this is the end result. In addition, the IRS, in the income tax audit procedure, may actually find that you missed some deductions, or your tax attorney may find missed deductions or other ways to reduce your tax liability, and that the IRS owes you money. This does happen on occasion.
Next in line would be an income tax audit that closes as fully agreed. In this case, the auditor does find some issues, and after consulting with your New York tax lawyer and yourself, a deal, so to speak is worked out. The main point here is that the auditor does find problems and you and your attorney will agree after negotiation with his/her assessment and you agree to pay the outstanding amount. Once this agreement is reached, you will sign off as will the IRS, usually using forms like the Form 4549 that has been reviewed by your tax lawyer. After this, the IRS will move to collect the amount agreed upon and when they are paid, all is well and the audit case is closed.
If things do not allow a full agreement then you end up with either a partially or fully unagreed case and then things can get more complicated. However, there is still a solution to this tax problem. If you and your tax lawyer and the auditor simply can’t come to an understanding, then the process moves to a higher plane of existence and your case can be appealed within the IRS (or State). If you can agree on some things, you will be asked to sign a Form 4549 and those issues get dealt with and taken off the table. If your case is not resolved in the Appeals process, you then have 90 days to file a petition with the US Tax Court.
By: Timothy S. Hart
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Frequently Asked Questions About No Change Letter, End of an IRS Income Tax Audit
Answers to common questions about No Change Letter, End of an IRS Income Tax Audit, relevant tax procedures, and when professional guidance may help.
An IRS income-tax audit can end with no changes, a fully agreed outcome, or unresolved issues that may proceed to appeal. This article explains what those audit conclusions mean. The rules and available options depend on the taxpayer’s particular facts.
The issue may affect filing obligations, tax balances, deadlines, penalties, collection activity, or appeal rights depending on the circumstances.
Keep the relevant tax returns, notices, account transcripts, correspondence, payment records, and supporting financial documents. The exact records needed depend on the issue.
Seek advice promptly after receiving a notice, learning of a filing problem, or facing an audit, appeal, or collection deadline. Early review provides more time to evaluate the response.
Timothy S. Hart is both a tax attorney and a CPA. He can review the facts, explain the applicable process, identify practical options, and communicate with tax authorities when representation is appropriate.
The IRS and State Tax Departments are not your friend, and are looking after their best interest
Stop fighting alone. Call now for your free consultation with Tim Hart.
