When the IRS sends you a Form 4564 IDR, it does not necessarily mean you are automatically facing a penalty. What it does mean is that the IRS is looking into your tax return and wants to receive more information for an audit. You need to give the IRS the requested information, but you must also be cautious because there may be potential penalties.
If you are subject to an audit, and the IRS is seeking more information, you need immediate legal representation to defend you. A New York tax lawyer from Thorgood Law Firm is ready to represent and guide you through this entire process. Too many people believe that if they have filed their returns, they will not face any issues in an audit. Unfortunately, many concerns can arise from even minor errors during an audit, so having professional guidance from the start is paramount.
What Is the Form 4564?
The main purpose of an IRS audit is to gather information about you to determine whether you have underpaid taxes in the past. They may decide to focus an audit on you, or you might be part of a more randomized request. Either way, the IRS is seeking to learn as much as possible about your income and deductions. The IRS will invariably make numerous requests for information during the audit process. They will do so by sending you a Form 4564.
The IRS is sending you the Form 4564 as the beginning or as part of the audit process. The purpose of the form might be related to:
- Unreported income
- Business deductions or credits
- Offshore accounts or foreign transactions
The IRS may request the following in the Form 4564:
- Bank statements
- Receipts for deductions or expenses
- Payroll or employment tax records
- Contracts, lease agreements, or loan documentation
Although the Form 4564 seems simple on its face, it can be a complex document request. You may not get much information or explanation on the Form 4564, but there might still be an extensive request for information that requires your action and response. The IRS can determine whether you owe additional money based on how you respond. You might receive several of these forms during the course of the audit process.
You Need to Respond By the Due Date in the Letter
The IRS will make specific requests and provide a due date for you to respond. Do not assume that the IRS is making any generic requests of you. If there is information that they are seeking, you should assume that they are seeking it for a reason. You must respond to the requests in the form in a timely manner. If you do not think you can gather the requested documentation by the due date, you must communicate it to the IRS and seek an extension.
If you avoid the letter or delay your response, you can face consequences from the IRS. First, the agency may go to court to obtain information through a subpoena. Second, the agency will assess penalties and interest on any back taxes you owe. The longer the audit lasts, the higher the penalties you may need to pay.
You may need to negotiate with the IRS as part of the audit process, especially if you end up owing a lot in back taxes. The agency may be less willing to negotiate with you if they perceive you as uncooperative in the audit process. The IRS may even expand the scope of the audit if it believes that you are being uncooperative.
How to Respond to the Form 4564
You need to take several steps to respond and provide the information that the IRS requests. You need to be thorough and organized to ensure you are giving the agency what they seek. Accordingly, you should do the following:
- Take the time to gather all of the information that the IRS is requesting (if you do not have certain information, draft an explanation for the IRS as to why you do not have the documentation)
- Organize your records before you submit them to the IRS (and make sure that your submission follows a logical format)
- Draft a cover letter to the IRS that narrates your submission (this cover letter should be as professional as possible)
- Submit your information to the IRS by the due date specified in the Form 4564
Why You Need a Tax Lawyer if You Are Being Audited
You should never attempt to deal with the IRS on your own if you are being audited. First, you have rights as a taxpayer, and the IRS may overstep during the audit process. Second, it takes professional experience to know how to respond to the IRS in a way that gives the agency what they need without volunteering too much information. Trying to defend yourself in the face of an audit can lead to worse results, including a large assessment with potentially steep penalties.
A tax lawyer plays a crucial role in audit defense by protecting your rights and ensuring you respond to the IRS properly and strategically. They analyze the audit notice, help gather accurate documentation, and communicate directly with the IRS on your behalf. If issues arise, they can negotiate to reduce penalties, prevent criminal exposure, or appeal unfair findings. Their knowledge of tax law ensures you do not make mistakes that can worsen your situation.
Contact a New York IRS Audit Defense Lawyer Today
The New York audit defense lawyers at Thorgood Law Firm can respond to the IRS and defend you during the course of an audit. We are here to protect your legal rights and present the most effective response to a difficult and stressful situation. You can schedule a free case review with an audit defense attorney by messaging us online. You should not wait to get legal help when the IRS is auditing you because delays in your response can put you in a more legally tenuous situation.
