It’s the last thing most people want to see at this tax-paying time of the year: A plain brown envelope marked «Official Government Business» with the return address of the Internal Revenue Service. But don’t panic. The news might not be as bad as you think.

While a full-blown tax audit might be your first thought, that notice might be the extent of your contact with the IRS. The agency might be telling you that you’ve made a math error on your return that must be fixed. Or maybe something on your W-2 doesn’t agree with your tax return. In such correspondence-audit situations, you usually can clear up the discrepancy with a couple of exchanges of information via the mail.

Then again, the worst could happen and that envelope could be a notice that one of your past tax returns is being audited in full. In this case, what do you do?

Sharon Tabor Warren, an enrolled agent and author from Amherst County, Va., says, «If I have prepared the client’s tax return for the year under audit, I ask them for an IRS power of attorney, Form 2848, and to forward their audit notice to me. Then, I tell them to sit back and relax — I’ll handle it from there.»

This makes a good case for having a professional prepare your tax returns! Read the rest of this entry »