Tax and financial professionals report that audits of individual taxpayers by the U.S. Internal Revenue Service (IRS) reached a 10-year high last year, with the total expected to keep growing and the popular Earned Income Tax Credit (EITC) waving like a red-flag for the federal officials.
Government agencies ranging from the IRS to local authorities have made strong efforts to publicize the EITC, which offers tax breaks to everyone from low-income individuals to middle-income families with children. Recent years have seen government agencies sponsor workshops in Spanish and other languages besides English in a bid to reach members of various ethnic communities. Representatives of a number of agencies have appeared anxious in recent years to see qualified taxpayers get extra money to spend, providing a boost to the economy as well as the coffers of local governments that take a cut of sales-tax revenue.
The numbers of taxpayers claiming the EITC have, indeed, risen over the years — and now comes the increase in audits. A recent study by H&R Block, a national tax preparation service, determined that the latest data made available by the IRS indicates that taxpayers who have claimed the EITCare more likely to get audited. An estimated 36.5% of the nearly 1.4 million individual taxpayers audited in 2007 were selected on the basis on an EITC claim, according to H&R Block.
There has apparently been no official reason provided for the increase in audits, leaving many tax professionals to speculate that it's an effort by the federal government to collect more revenue in the face of record budget deficits.
Regardless of the reasons, the trend is a fact, according to Eileen Brow, a Southern California-based district manager for H&R Block. Brow adds that anyone facing an audit will likely need some help as the number of audits climbs.
H&R Block offers the following tips to anyone who is called for an IRS audit based on their EITC claim:
- Get Professional Help: Tell your tax professional you received a letter and arrange to meet to discuss your tax situation.
- Do Your Research: Review relevant data for the audit. Locate receipts, checks, and other pertinent records.
- Consider Representation: Taxpayers may represent themselves or engage an Enrolled Agent, Certified Public Accountant (CPA), or attorney to act as their representative. Weigh this choice carefully.
- Organize: Only take copies of documents to the audit that the IRS requested, along with any supporting materials.
- Be Succinct: Stick to the facts when answering the auditor's questions. Don't volunteer information that's not asked.
- Appeal: The results of the audit may be appealed if the taxpayer disagrees with the auditor's findings.
Sam Hassan is a writer for the L.A. Garment & Citizen.
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