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Facing an audit? First, take a deep breath - but then what? cont.

We are back to discussing what the average taxpayer should do if the mails brings an audit notice from the IRS. In our May 16 post, we talked about the odds of being audited -- very slim for someone with an average paycheck -- and the types of things on a tax return that could trigger an audit. For the most part, the IRS is not interested in casting a wide net to scoop up as many taxpayers as possible. The agency is more interested in the people whose returns show anomalies, and the more anomalies, the more likely an audit.

The question remains, though, of what to do if you receive The Audit Letter. Panic may be unavoidable, but a taxpayer should take a deep breath and read the letter carefully. First, it may not even be a notice of an audit. The IRS may simply need more information about something on your return.

Second, if it is an audit, the IRS may not be looking at your entire return, or the audit could be about your 2011 or 2012 return. (The agency can go back three years.)

Finally, the letter will give you a deadline for responding. Missing or ignoring the deadline can be costly.

After you have identified what information the agency needs, gather the appropriate documentation. Tax professionals advise against giving the IRS more information than it has requested. You do not want to open the door to a review of the rest of your return or returns from other years. Simply answer the question, and it's over.

It looks simple on the surface, but for many this may be overwhelming. If that is the case, or if you have concerns about the questions the IRS is asking, you may want to contact a tax attorney for assistance.

Source: Fox Business, "What to Do if Your Receive an Audit Letter from IRS," Donna Fuscaldo, May 9, 2014

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