IRS Issues & Compliance Faqs
What triggers an IRS audit?
Audits are often triggered by inconsistencies, underreporting, or missing documentation.
How likely is an IRS audit?
Most taxpayers are not audited, but risk increases with income and complexity.
Can accurate records reduce audit risk?
Yes. Proper documentation significantly lowers audit exposure.
What should I do if I receive an IRS notice?
Respond promptly and seek professional guidance immediately.
Should IRS notices be ignored?
No. Ignoring notices can lead to penalties or enforcement actions.
Can a CPA communicate with the IRS on my behalf?
Yes. CPAs can represent you before the IRS.
What is an IRS audit?
A review of tax filings to verify accuracy.
What types of IRS audits exist?
Correspondence, office, and field audits.
How long does an IRS audit take?
Audits may take several months or longer depending on complexity.
What records are needed for an audit?
Income documents, expense receipts, and supporting records.
Can penalties be reduced or removed?
Yes. Penalty abatement may be available.
What is penalty abatement?
Reduction or removal of IRS penalties.
What is interest charged by the IRS?
Interest accrues on unpaid tax balances.
Can IRS interest be waived?
Interest is rarely waived, but penalties may be.
What is an installment agreement?
A payment plan for unpaid taxes.
Who qualifies for an installment agreement?
Taxpayers unable to pay in full immediately.
What is an offer in compromise?
A settlement for less than the full amount owed.
Who qualifies for an offer in compromise?
Those unable to pay full tax debt.
What is currently not collectible status?
Temporary suspension of IRS collection efforts.
How often should financial statements be reviewed?
Tax debt may expire after the statute of limitations.
Does tax debt go away over time?
Tax debt may expire after the statute of limitations.
What is the IRS statute of limitations?
Generally ten years for collections.
Can the IRS levy wages?
Yes. The IRS can garnish wages.
Can the IRS seize bank accounts?
Yes, if balances remain unpaid.
What is a tax lien?
A legal claim against property for unpaid taxes.
How does a tax lien affect credit?
It can damage credit and financial standing.
Can tax liens be removed?
Yes, under certain conditions.
What is IRS compliance?
Meeting all filing and payment requirements.
What happens if taxes are filed late?
Penalties and interest may apply.
What happens if taxes are not filed?
The IRS may file a substitute return.
What is a substitute for return?
An IRS-prepared return that often overstates taxes.
Can late returns still be filed?
Yes. Filing late is better than not filing.
What is voluntary disclosure?
Self-reporting errors before IRS action.
Can CPAs help fix past tax mistakes?
Yes. CPAs correct filings and negotiate resolutions.
What is tax fraud?
Intentional misrepresentation of tax information.
How is tax fraud different from tax error?
Fraud is intentional; errors are accidental.
What is tax evasion?
Illegal actions to avoid paying taxes.
What is tax avoidance?
Legal strategies to reduce taxes.
Can CPAs protect against compliance issues?
Yes. Professional oversight reduces risk.
What is IRS correspondence audit?
Audit conducted entirely by mail.
What is an IRS field audit?
An in-person audit at your location.
How should I prepare for an IRS audit?
Gather records and consult a CPA.
Can audits be appealed?
Yes. Taxpayers have appeal rights.
What is the IRS appeals process?
A review by an independent office.
Does IRS enforcement increase over time?
Yes. Enforcement priorities shift regularly.
Should I keep copies of filed tax returns?
Yes. Keep copies for at least seven years.
Can CPAs help with multi-year tax issues?
Yes. CPAs manage complex back-tax situations.
When should I contact a CPA about IRS issues?
Immediately upon receiving any IRS notice.