IRS sends out audit letters to millions waiting for tax refunds: Here’s how to fix it

As the IRS faces an historic backlog of tens of millions of 2020 tax returns, a new tool is coming to help taxpayers send in supporting documentation to assist with processing some of those backlogged refunds.

The IRS has been sending out letters requesting additional documentation to millions of Americans who filed taxes normally during the spring. For a variety of reasons – including the stimulus payments sent out to Americans – the IRS has been historically behind. In fact, upwards of 35 million individuals and 8 million business tax returns all are in a state of flux.

When the IRS sends a letter to a taxpayer saying they need supporting documentation – it’s called a correspondence audit. Essentially, a low level audit that requires an easy fix or a couple pieces of validating information to finish the process.

Whether it’s a questionable refund, or unique situation – these low level audits are entirely normal. Here’s a bigger problem though: More than 94,000 of these audits remain unresolved from 2019, which means that there’s a good chance that 100,000 – or several hundred thousand filers may never see a resolution to these audits.




What should you do if you receive an audit letter?

The letter will outline precisely what documentation you need to send along. It will also give you a timeline. Typically the timeline is 30 days. The IRS will not make a second attempt at contacting you – so act on the first letter – as it will be the last one you receive.

The National Taxpayer Advocate reported earlier this week that the IRS is rolling out an online tool that will allow audited taxpayers to upload supporting documentation with a few clicks. U.S. Mail or fax has been the only option in the past.

This is important for those who are owed a return because those claims resolved digitally will be refunded more quickly.

“It allows taxpayers to upload documents in real time, allowing an IRS employee to discuss the documents with the taxpayers,” the Tax Advocate explains. “If a taxpayer has an open correspondence examination audit, he or she should inquire with the examination telephone assistors to determine it the tool is available for their case.”

The tool is said to be going live later this month.


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