After your client’s return is finalized and timestamped in the TaxSlayer Pro software, it is sent electronically to the IRS for review. Here’s what you should know about the process.
The IRS review: What they look for
The vast majority of individual tax returns are only reviewed by the IRS’s discriminant inventory function system (DIF). This computer program scans returns for inconsistencies and red flags that suggest a return may need to be reviewed. The DIF assigns scores to all individual tax returns. The higher the score, the more likely the return will be flagged for an accuracy review.
Accepted returns
If your client has provided you with all relevant tax forms and you have carefully prepared and reviewed their return, you will not usually run into any issues. If your client is owed a refund, they will normally receive it within 21 days. You can help them select how they receive their refund. Direct deposit and bank products are usually the quickest methods.
If your client owes money, they will choose how to pay the IRS and apply for a payment plan if needed using Form 9465.
Why was my client’s return flagged?
Unreported income
The IRS has record of taxpayers’ W-2 forms and 1099s . If clients fail to report income from these documents, the DIF will certainly flag their return for review.
TaxSlayer Pro Web includes a feature called “Guide Me” to help less experienced preparers connect their client’s tax documents to the correct forms, which helps to reduce these kinds of errors.
The People First Initiative has suspended normal auditing and screening protocols for the time being due to COVID-19. Read more about this temporary adjustment here.
Typos & other errors
Many rejected returns are the result of simple mistakes. Mistyping a Social Security number or failing to sign and date a document can cause an otherwise correct tax return to be flagged and reviewed. These are called mismatch errors. The IRS places a reject code detailing the error on the tax return, which is sent back to the preparer’s software for correction and resubmission. E-filed returns can be rejected and corrected immediately.
Filing electronically with the right tax software can help you avoid mistakes like this.
Read also: 9 Tax Return Filing Errors to Avoid as a Preparer
Unusual deductions
If a taxpayer’s charitable contributions or other itemized deductions are unusually large for someone in their economic situation, the DIF will likely flag their return for review.
TaxSlayer Pro uses Diagnostic Errors and Warnings to flag these types of errors so that you can review and correct them before filing the return.
Very high income
Statistically, those with higher incomes are more likely to be reviewed or audited.
In the event of an IRS audit
If a client is selected for an audit, they will receive a letter from the IRS, usually requesting specific documents to verify the information in the return. In most cases, the audit will be carried out through mail and won’t require an in-person meeting. In some cases, mailing a few documents is enough to resolve an audit. In others, your client may end up owing more money.
Taxpayers have the right to representation during an audit, and your responsibilities as their tax preparer will depend on your credentials. Enrolled Agents, CPAs, and attorneys have unlimited representation rights, which means they can represent anyone before the IRS. Annual Filing Season Program participants have limited representation rights and can only represent clients whose returns they have prepared.
If you do have representation rights, you can assist your client with gathering and sending relevant documents and appealing the decisions they disagree with.
If you do not have the proper credentials to assist your clients in an audit, TaxSlayer Pro can help you partner with Audit Maintenance Pro (AMP) or Protection Plus. These groups will help protect you and your client in the event of an audit.
Following up with clients after filing
Clients may have questions for you after filing, particularly if their refund is delayed or if they are being audited. You can direct them to the IRS Where’s My Refund? and Where’s My Amended Return? tools to track the progress of their refund or IRS review.
