IRS Notice | Understanding your Audit Form 4549

IRS Notice - Audit Form 4549 Audit Report

The IRS uses Form 4549 for one of two reasons: 1) To assess a tax for unfiled returns (SFR), 2) To reports its audit findings. They also can use Form 4549-A or Form 4549-E. The IRS might also use Form 5278. They also will include various cover letters: Letter 525, Letter 692, Letter 950, Letter 1912, or Letter 5262.

The IRS will usually request that you sign & agree to the balance due with Form 870 or you can sign the second page of the Form 4549.

Know Up To 6 Months in Advance That You Are Going to be Audited, With Audit Alarm Real-Time Monitoring

If your return(s) are not filed:

You could have received the Form 4549 along with a Notice of Deficiency when you have unfiled returns and the IRS has determined that you owe. This means that the IRS has prepared a return for assessment purposes that is known as a Substitute for Return (SFR). As a response, you have choices 1) Preparing an original return in dispute of the SFR 2) Filing a Petition in Tax Court within 90 days. In the Notice the IRS might list all the documents upon which they rely to assess the tax. To prepare the return in dispute you will want to call the IRS at 1-800-829-1040 and order your Wage and Income Transcripts for the tax years. Contact our office so we can prepare your file and avoid trouble.

If your return(s) are filed

More likely, you have participated in an IRS audit and the IRS is reporting its findings to you on Form 4549. They also can use Form 4549-A or Form 4549-E. The IRS might also use Form 5278. They also will include various cover letters: Letter 525, Letter 692, Letter 915, Letter 950, Letter 1912, & perhaps, Letter 5262, which gives you another chance to respond.

The IRS will usually request that you sign & agree to the balance due with Form 870 or you can sign the second page of the Form 4549. The legal implications of signing and agreeing to this are serious so please DO NOT sign the second page if you do not agree. This is NOT A BILL so don't give up! Depending on how prompt you are, we can force a revision of this Form 4549 or we can always go to Appeals or Tax Court!

Steps in response to Form 4549, if the 4549 is the result of an audit

Your options are: 1) to pay the bill, 2) gather the documentation or law to support your case & respond with Form 14431, 3) Appeal to the agent's manager, 4) Appeal within the IRS, or 5) wait for a Notice of Deficiency and petition in Tax Court.

If you agree with the calculation at the bottom of the 2nd page of Form 4549, sign & send it by certified mail to the agent.

Note: A positive amount on the button of Form 4549 is an indication of a balance due. A negative amount is the new refund amount. Lets run through some potential scenarios;

If you were originally expecting a refund and there is a positive number on the 4549, the IRS is indicating that not only will you not be receive the refund, you have an addition balance due.

If you were originally expecting a refund and there is a negative number on the 4549 but it is less than the expected refund, the IRS is indicating that your refund has been reduced.

If you were originally expecting a refund and there is a negative number on the 4549 but it is greater than the expected refund, the IRS is indicating that your refund has been increased (not likely).

If your original return shows a balance due and there is a positive number on the 4549, the IRS is indicating that your balance due has change to the amount indicated. This may be more or less than the original balance due.

The address is shown on the 2nd page or on any Letter 692 or Letter 1912 you may receive. You can also send them money but if you can't pay it entirely the IRS will send a bill to you with instructions.

If You Default

If you do not respond to Form 4549, the IRS will send you a Notice of Deficiency. This gives you 90 days to petition Tax Court. If you do not file a petition, the IRS will the taxes against you. We almost always opt for Tax Court .

If You Disagree

If you disagree your options are 1) Gather the documentation or law to support your case & respond with Form 14431, 2) Appeal to the agent's manager, 3 Appeal within the IRS Appeals Office, or 4) wait for a Notice of Deficiency and petition in Tax Court.

The legal implications of signing and agreeing to this are serious so please DO NOT sign the second page if you do not agree.

This is NOT A BILL so don’t give up! If you can catch it before the case has been closed changes can still be forced You also have the right to appeal or petition the Tax Court.

Your options are: 1) to pay the bill in full, 2) to gather more evidence or case law to support your case, 3) Appeal to the agent’s manager, 4) Appeal within the IRS, or 5) Wait for a Notice of Deficiency and petition Tax Court.

If you agree with the calculation at the bottom of the 2nd page of Form 4549, sign & send it by certified mail to the agent at the IRS office address on the 2nd page or on any Letter 692 or Letter 1912 you may receive.

If you do not respond to Form 4549, the IRS will send you a Notice of Deficiency. You will have 90 days to petition the Tax Court. If you do not file a petition, the IRS will bill you for the taxes.

If time is running out on the audit statute, they will likely ask you to sign an extension Form 872 so they can continue to examine you. Please do not sign this without legal advice. We generally do not grant extensions to the IRS unless there is a specific reason to do so.

Income Issues: The IRS will determine your income by reviewing the Wage & Income Transcripts, your bank records & your lifestyle. You should get the Wage & Income Transcripts from the IRS Agent or by calling 1-800-829-1040 so you can compare them with your records.

The IRS will declare all deposits into bank or other accounts to be income unless you can prove otherwise.

By reviewing your assets & purchases the IRS will estimate if the income you reported compares to your lifestyle.

Deduction Issues: The IRS Agents often deny deductions because the evidence is insufficient, is poorly organized or lacks substantiation. Each item being questioned on your return has its own unique legal evidence requirements – more than just a few receipts or canceled checks or even an accounting software program. You must produce titles, insurance policies, purchase & transaction records, license information, employment records, etc. to prove your case. Each issue requires its own unique approach.

Lost Documents: If you didn’t keep your records or the records are lost or unavailable we can still re-create your case. Unless you dealt solely in cash, bank records & credit card records can be obtained. Even if you used a lot of cash, we can get affidavits or use industry standards to arrive at a reasonable figure.

What is my first step?

If you received a letter or notice, a decision has to be made. Do you feel confident to handle this situation on your own? If it is a simple issue and you already know the answer, call or write them. If the issue is more complicated, you need to hire a Certified Tax Resolution Specialist. The IRS or State will take full advantage of your lack of knowledge and experience.

What is Your Next Step?

The next step is to determine if the notice was sent in error. Do you have an outstanding tax liability? Do you have unfiled or incomplete returns?

Is There a Time Limit?

Yes, each letter or notice from the IRS or State will indicate a date that you MUST to contact them by. If you need more time, call the number on the notice or letter and request an extension. DO NOT ALLOW the time to expire without contacting them or hiring a representative to contact them for you.

What You Don’t Want to Do!

What you don’t want to do is nothing. Your tax problems will only get worse if you ignore them. If you cannot pay, there are a number of potential solutions available to those who are otherwise in compliance. In compliance means having all tax returns filed and any balances paid or on a payment plan. If you have outstanding debts or unfiled returns, you need to get hire a Certified Tax Resolution Specialist.

Get Some Help

If you don’t know how to address the issue(s), have unfiled return/unpaid balances or just done feel confident, let the experts at Legacy Tax & Resolution Services represent you. Work with our team of Certified Tax Resolution Specialists to resolve your issue(s) quickly. Best of all, you don’t have to talk to the IRS or State; we can speak on your behalf.

Stop the stress and resolve your problems Call 800-829-7483 TODAY

For more information, see Frequently Asked Questions- Top 10 Audit Mistakes