Did you know? Audits can affect future tax return filing.
Most taxpayers know that an audit can be a headache, however many people are unaware that it can also affect future tax return filing.
If an audit was closed and it was determined that the taxpayer was not eligible for certain credits claimed, the IRS now considers these credits to be disallowed. This includes both Child Tax Credits and Earned Income Credits.
In order to claim those credits in later years, form 8862 would need to be filed along with future tax returns. This needs to be done for the first two years filed following an IRS determination to disallow credits, and for 10 years if the IRS considers the credits to have been claimed fraudulently. Although many are weary of filing this form and ‘reminding’ the IRS of their past audit, failure to file the form can result in returns not being processed, and additional delays until the form 8862 is actually filed.
This is another reason not to ignore an IRS audit.
Ignoring an audit usually means that it will eventually be automatically closed with the credits deemed disallowed. This in turn raises the likelihood of being audited the next time one files a tax return. So, although audits are not pleasant to deal with, it is always advisable to work an audit through, even taking the case to tax court if necessary, to prove one’s eligibility and the return accuracy.
