Tax Minute
AUDITS (3)
I get calls on the Tax Line all the time from people who are being audited by the Commonwealth of Massachusetts. Unlike with the IRS, all individual audits for the Commonwealth of Massachusetts are conducted via correspondence. In many cases, taxpayers are required to photo copy and mail hundreds, if not thousands of pages of documentation to the Massachusetts Department of Revenue to prove their income and expenses. Many taxpayers do not want to spend the huge amounts of time it will take to do this or pay an accountant a fee that in many cases will be more than the State is asking for and will suggest that they just pay the tax. More often than not, I tell taxpayers that this is a horrible idea. The reason for this is that the Commonwealth of Massachusetts, and most other states, have information sharing agreements with the IRS. If the Commonwealth of Massachusetts suggests changes to your tax return and you agree to them and pay the balance due, that's just the tip of the iceberg in the amount of money you'll have to pay out. The IRS may piggyback on these audit changes and at a minimum will send you a bill that, depending on your tax rate, can be nearly ten times the amount that you had to pay to the Commonwealth of Massachusetts. In addition, the IRS may decide to conduct a full-blown audit of your tax return which can result in you having to do much of the work that the Commonwealth of Massachusetts was asking you to do.