Expert: Consuelo Herrera, International Accountant and Fraud Examiner - 7/10/2008

Question
hello, hope i am at the right place to ask this q'; I live in the state of Florida. my tax return is being audited. i rec'd a letter in the mail stating 'tax year 2006'. under the paragraph 'why are you getting this notice?' it states - the income & payment info we have on file does not match entries on your 2006 form 1040A'. they state i owe $1,227.00 my first question: are they auditing me for 06 or 07 return? when they say 'info doesnt match' do they mean the info when they are comparing '06 to '07 return?  2. here is my situation, trying to make it short. i am married and filed jointly in 06 & 07. however in 07 i did not have my husband's w2 form since he was in jail and his company refused to hand the w2 to me. they requested he would contact them from jail but it took so long so i went ahead and filed only my w2, as married filing jointly with both of our names and social securities 3 on it. i did this through a tax professional & was not told it may casue a problem. well, my husband got out of jail. we are separated now & our connection during his jail time was very minimal. in the beginning of June he tried filing for his own w2, that was not included in my filing. i do not know if this is the reason i am being audited but i do know ALL OF THE ITEMS in the audited list are his, under his ss# and his income. what i do not understand is why they are auditing 06? in 06 we had his w2 as well. he had 1 w2 that he was missing and we didnt file. but it looks like now they are auditing me regarding ALL his income from 06. The IRS letter states the reason i'm being audited is 'information rec'd from others about you'. The only thing i can think of is the fact my husband tried filing for his tax, after his name and ss# was already showing on the tax return i did for both of us. would you think that would be the reason? so if they are auditing me for just 1 w2 form missing on 06 (he had 2 w2 forms that year) so wont i be audited AGAIN for 07, since i was missing his w2 completely? 2. is the fact i am being audited, puts me under closer watch for coming yrs? did i just get myself on the 'hit list'? 3. i asked for a 1 month extension since i did not have time to address this yet. does that automatically effect my credit score, since i did not pay or responded on time? what are the implications on my credit score, assuming i could settle this with in the 1 month extension? would it still effect my credit if i end up paying back, but do monthly payments for a year?  4. after my husband was released from jail, he informed me he is about to get food stamps in the mail. he did get something in the mail from that department but i did not check to see what it was. could that be a reason for audit? when a person asks for food stamps, do they go back and check your tax return to see if you qualify? if yes, why did the response about the food stamps came back only addressed to HIM & not to BOTH of us, since we are married and they are basing it on tax return of BOTH of us? 5. i read on the IRS letter something about 'innocent spouse relief'. There are a few of those. could i qualify for any, since my husband was in jail and my communication with him was very limited?  6. what should i do now/ if i just pay back the money, would they leave me alone? could i fight it in any way? i guess to them it looks like i didnt report some of my ours income because his w2 was missing.  i know this is long, thank you for your help!

Answer
Dear AYELET,

Thanks for writing.

You are asking questions about two different matters here. According to your question you are being audited for the year 2006. The best way for addressing this and giving an appropriate response to the IRS if you are not entirely confident, is to contact the tax professional who prepared your tax return.

When the IRS sends you an Audit notice, it gives you the reasons of the audit and they attach a letter with an explanation of the audit process.

There is also a Taxpayer Compliance Measurement Program (TCMP) IRS tax audit, which is the most thorough of all IRS tax audits. Persons selected for TCMP tax audits must verify all data on their tax return.

If you are aware of inconsistencies in your 2007 tax return, the best way to take care of it is to file an amended tax return before the IRS sends you a notice.

IRS and credit score are two different things. If you are assessed and amount by the IRS and you do not pay it, that will be reflected on you credit score as it will eventually be collected in the same manner that a private company does and therefore, it has the same implications.

I suggest that you contact the officer that sent you the notice and have a conference with him or her to find out more about your audit process.

I wish you the best in this endeavor.

Sincerely,


Consuelo Herrera, CAMS, CFE