Mistakes are sometimes inevitable when filing tax returns, especially for businesses. For this reason, it’s not uncommon to have your tax return put under review. When you receive the IRS review letter, it does not always mean you will be audited. It could be that you miscalculated, didn’t include a form, or the computer is simply taking more time processing your return. In any case, inquire from the IRS why your return is under review to have a better perspective on what to do. Here are some of the reasons why the IRS may review your tax return.
1. Processing of electronic filing
If you use an online portal to file your returns, the portal usually puts your tax return under review. This simply means IRS hasn’t yet received the tax return, and once it’s reviewed, it will either be accepted, flagged for errors, or moved for in-depth auditing. So unless the IRS has received your return, the portal will display it as under review. So no need to worry.
While not all tax return reviews lead to in-depth auditing, some reviews may prompt for an audit. This is usually the case when the forms don’t add up or your filings have raised red flags that cause the IRS to require a full audit. That’s why it’s important that when you receive an IRS review letter, to read the details and understand the reason for the review.
To err is human. During filing, taxpayers are required to calculate their credit and deductions before filing their tax returns. If you’re not familiar with the calculations, you may do them incorrectly. The IRS system will raise red flags when miscalculations are detected, putting your return under review. This delays the process, but in most cases, the IRS will correct the calculations and adjust accordingly.
4. Missing forms
When you file your tax returns and fail to include crucial forms such as W-2s, or receipts for expenses, or bank statements, the IRS may raise red flags and put your tax return under review. In such instances, all you need to do is gather the missing forms and mail them to the IRS or have your tax return adjusted and the missing forms included. It is therefore not a cause to worry.
5. Additional forms
Sometimes you may have included all the necessary forms required when filing tax returns, but the IRS may require additional documents. This causes your tax return to be put under review. This happens when the IRS has reasons to believe that you are misrepresenting facts, prompting them to ask for proof. When this happens, you simply have to look for the requested forms and add them.