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Filing your return may not mean the end of tax issues
March, 23rd 2018

Just because you file your taxes for a refund and the IRS accepts your return doesn't mean you are free and clear.

Each year, the IRS mails notices to millions of taxpayers challenging their reporting. Notices from the tax collector aren't as severe as an agency audit, yet they serve essentially the same purpose — and most likely you'll owe taxes.

"Technically, these aren't audits," said Jim Buttonow, director of H&R Block's Tax Audit and Notice Services. "But that doesn't really matter, because they feel like audits to most people."

Taxpayers are more likely to receive an IRS notice than an actual audit. In 2016, the IRS challenged more than 5.1 million returns, mainly for underreported income and math errors, according to an H&R Block analysis of IRS data. That compares with just over 1 million audits that year — a roughly 30 percent drop since 2011.

Budget cuts may explain the decline in audits, but the rising sophistication of algorithms means the IRS can flag mistakes, omissions and discrepancies with greater ease and efficiency in our ever-expanding world of digital paper trails, tax experts say.

"It's a little bit of Big Brother," said James Guarino, a certified public accountant and certified financial planner in Tewksbury, Massachusetts. "The government's computers have a straight-forward matching process. ... There is no place to hide."

Taxpayers can be audited or hit with a tax notice at any time of the year. The IRS letters can go out a few months after you file or as far back as three years from your filing date. Responding within 30 days is the best advice to avoid additional tax, penalty or interest.

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