IRS audits are among the most dreaded tax problems. Even though the IRS audited only 1% of returns in 2010 through traditional audit procedures, the IRS sends “unreal” audit letters (Nina Olson’s term) alerting taxpayers to underreported income and math errors at a much higher rate. Full-blown audits are infamous for sapping taxpayers’ time, money, and sanity. But the “unreal” audit letters often have a similar effect.
[T]raditional audits are just one way the IRS enforces the tax laws. Increasingly, the IRS is relying on what IRS Taxpayer Advocate Nina Olson calls “unreal” audits. These typically come in the form of a letter alerting you to errors or omissions on your return. While these audits are less intrusive than full-scale audits, they can still cost you real money.
~ Sandra Block, USA Today
Read more here.