True enough, being audited is already a pain in the neck, but there are also other rare but serious audit problems you should take note of.
In previous discussions, it was mentioned that the Internal Revenue Service is supposed to send the audit notice to your last known address. The catch is, they are not required to confirm whether you received it or not. Some taxpayers are surprised to get examination bills as the audit notice was sent to their old address.
The IRS is required to regularly update its files and deliver notices to the most recent address you indicated in your tax return. The agency is given three months to update the record as soon as they receive a notification that you are changing your address.
Now, if you happen to change residences and you did not answer the audit letter (because you weren’t able to receive it in the first place), the IRS auditor will consider your case a “no show.” This means that deductions and exemptions are prohibited. The IRS will then send an audit report to let you know of the appeal process or a Notice of Deficiency offering you around three months to file a case in tax court. If you think about it, the agency is unfairly moving on with the process, thinking that you received the documents through your address. It would not bother to verify if you actually got the notices because, legally speaking, as long as it sends out the notices to your last known address, it is doing its job. So here’s how you can fight back:
Write or call the IRS to request an assessment reconsideration. Inform them that you have not been receiving any notice because you changed your address. You can also schedule a meeting to talk with an auditor. This is discretionary, so you do not have the right to demand this reconsideration, but usually, valid requests will be granted.
If your request for an assessment reconsideration is rejected, the next thing you can do is to bring it to the tax court. You can argue that you have not been receiving deficiency notice in your last known address, per the requirement of law.
The other audit problem is jeopardy assessment which is usually done against foreigners or foreign businesses located in the United States. The key here is to meet a tax attorney right away because the IRS will have the power to conduct fast assessments without an audit, and it will take your assets without prior notice.
This one happens only if the agency thinks that you seem to be hiding out or planning to depart the country, you are concealing or removing properties from the country, or if your financial security is endangered.