If you’ve been notified that your tax return is subject to an Internal Revenue Service (IRS) audit or examination, you may have received an IRS Information Document Request or IDR. This formal request from the IRS is a standard part of the auditing process, but it can still be intimidating and confusing if you’re unsure what it entails. It’s essential you understand the details of an IRS IDR, including what it is, why you might receive one, and how to respond.
What is an IRS IDR?
An Information Document Request is made on IRS Form 4564 and is issued when the IRS decides to audit your tax return and needs more information than what is available on your submitted documents. Essentially, it is a written request for additional details or clarification that the IRS might need to verify your income, expenses, or any deductions claimed. The IRS uses this tool to ensure accuracy and compliance with tax laws.
Depending on what the IRS seeks to verify, these documents could range from bank statements, canceled checks, invoices, ledgers and journals, payroll information, or other records.
Why Would You Receive an IRS IDR?
Various circumstances could lead the IRS to send you Form 4564. These could include discrepancies in your reported income, questionable deductions, unreported foreign bank accounts, or anything that doesn’t add up based on the data the IRS has.
An important thing to note is that receiving an IRS IDR does not necessarily imply wrongdoing on your part. Sometimes, it might simply mean that the IRS needs further clarification for an item in your tax return.
Responding to IRS Form 4564
If you receive a Form 4564, do not panic. Instead, take the following steps:
- Understand the Request: The form should specify the information or documents the IRS needs. Make sure you understand the request entirely.
- Gather Documents: Collect the requested information. It’s crucial to provide what’s asked and not to send more or less than that.
- Seek Professional Help: If the request seems complicated or you’re unsure about the appropriate documents to send, it would be best to consult a tax professional. A CPA, tax attorney, or an enrolled agent can provide guidance and handle the communication with the IRS.
- Reply Timely: Form 4564 will indicate when to provide the requested information. However, if you need more time, you can request an extension. Responding within the given time frame is essential to avoid further complications, such as the IRS issuing a summons for the documents.
What Happens After Submitting Your Response?
After you’ve sent your response to the IRS, an auditor will review the documents. The process will conclude if everything checks out and the auditor is satisfied with the provided documents.
If the auditor still has questions or doubts about your tax return, they might send a follow-up request. If it turns out that you owe more tax and you agree with the adjustments, you’ll receive a bill for the additional tax due, plus any penalties and interest.
If you disagree with the auditor’s report, you can request an appeal with the IRS Office of Appeals to dispute the adjustments.
Get Help With Your IRS IDR
An Information Document Request might seem intimidating, but understanding its purpose and how to handle it can significantly ease your mind. Remember that an IRS IDR is a standard part of IRS audits and is merely a tool for the IRS to ensure everyone is complying with tax laws. When in doubt, don’t hesitate to contact the CPAs at East Coast Tax Consulting Group for professional tax representation that will help you through the audit process. Stay informed and be prepared; this is your best strategy for dealing with any tax-related request or issue.