IRS Random Audits are Back

    In about six months, a group of taxpayers will receive official letters from the IRS telling them they have been chosen for a special study. It involves auditing their tax returns ... even though the tax agency has no reason to suspect they have done anything wrong. These random audits will be done so that the IRS can better detect areas where taxpayers are not complying with the law.
    According to the IRS, the National Research Program will start in October 2007 and auditors will examine about 13,000 randomly selected individual returns for tax year 2006. Data gleaned from the audits will help reduce the tax gap -- the difference between what all taxpayers should have paid and what they actually sent to the federal government on a timely basis.
    IRS random audits are controversial. In the early 1990s, the tax agency was criticized for conducting lengthy line-by-line audits in which taxpayers were asked to prove nearly everything on their tax returns. After Congress complained about the cost and intrusive nature of these audits, the IRS scaled back its random audits in a couple of programs. But now, the IRS has announced that a new updated program is needed "because as time passes, patterns of noncompliance change."

Note: In previous random audit "Taxpayer Compliance" programs, taxpayers must produce every record and justify every expense. Preparing for the audit takes a large effort and is very expensive. If you, or your business, receive an audit notice, IMMEDIATELY CALL Ronald J. Cappuccio, J.D., LL.M.(Tax) at (856) 665-2121.