Irecently saw a survey that asked ordinary Americans the two situations that would instill the most fear and panic within them. The results from this survey were interesting. The most feared situation was an insect swarm.. .and the second most fearedsituation was an IRS audit. As PCOs, I think we can handle the first item for ourselves and for our clients. But what happens if one day you go to your mailbox and pick up an envelope addressed to you with a return address from The U.S. Treasury— Internal Revenue Service stamped "Official Business." Nothing strikes an emotional chord with small business owners like the prospect of a tax audit. In this case there might be a full tax audit looming; however, many times these envelopes contain a letter stating that a math error was made or that they received a 1099 from a payer linked to your tax identification number that you failed to include on your return. In this case, you confirm the error and pay the additional tax, penalty and interest. If the IRSis not correct in their assertion, then you have the opportunity to return the letter with your explanation and wait for a response. In any event if, in fact, you do owe the additional tax and you have a reasonable explanation for the error, the IRS mayabate the penalty if requested.
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