Automated Underreporter program IRS AUR Cases

The Automated Underreporter program. AUR cases are created from two primary sources: the Individual Master File, or IMF, that contains the individual tax return information filed; and the Information Returns Master File, or IRMF, that contains the payer information filed. After all current-year returns are processed, they are computer-matched to the corresponding IRMF file.

 

IRS Information Matching and Audits

IRS matches information from 140 million 1040 returns to over two billion information returns each year. It is important to note that AUR is not a real-time process. When systemically identified mismatches are encountered, cases are selected into the AUR program as potential inventory for analysis. This begins within seven months of the filing due date. Not all mismatches result in a notice being generated.

How does the IRS Get Information for Tax Audit?

Tax examiners screen the data to verify whether the mismatch is located elsewhere on the return before creating a case. Tax years generally end on December 31, but the IRS does not receive information from employers, banks, businesses, and other payers until later. Once the IRS receives all the payer information, our computer system compares the information the payers provided.

 

Automated Underreporter Program Notices

This IRS is working hard to shorten the time it takes to contact the taxpayer. Generally, the earliest you’ll be contacted will be within 12 months from the date you filed the return. The IRS selects inventory throughout the year. The amount of time it takes to contact the taxpayer is a recurring concern received in customer satisfaction surveys related to AUR. The IRS understands the challenge and frustration this is for both you and your client. It is important to inform your clients that contact cannot be made any sooner due to the time necessary to ensure all information returns have been received and the matching process is complete.

 

IRS AUR Case Review

AUR cases are reviewed by IRS tax examiners before a notice is generated. If income reported by payers cannot be identified on the tax return, AUR will issue a Notice CP2501 or CP2000. When certain conditions are present, a CP2501 notice will be issued. This notice is a preliminary inquiry letter and does not propose a change to tax liability. It supplies payer information and explanation paragraphs concerning the income discrepancy.

 

What are AUR Notices?

I would like to take a moment to cover a few items regarding the AUR notices. It is important to read the notice and understand the issues that are being questioned. You can identify the notice type, the tax year in question, the taxpayer’s Social Security number, the AUR control number, and the AUR toll-free telephone number by reviewing the top right of the notice. Now, this area will also include the last day to file a petition with tax court if it is the Statutory Notice of Deficiency.

What is an AUR Control Number?

The AUR control number is used internally and cannot be used to research or look at that taxpayer account. The taxpayer’s SSN is what is needed. At this time – we understand because of identity theft and the issues surrounding that – we are working on implementing the use of barcodes in lieu of showing the full SSNs on these notices. But right now, due to some systemic and budgetary constraints, this is not going to be feasible until FY17. Each notice under the additional information section on page two contains a Web landing page link, and this link will direct you to notice-specific items, such as various FAQs, helpful hints, how to avoid the same mistakes next year, direct links to the publications that you may find helpful, as well as links and information on various payment options that could be available, and also how to order a transcript.

 

What do AUR Notices contain?

All AUR notices will contain Publication 1, Your Rights as a Taxpayer, as an enclosure, which addresses taxpayer rights and includes information on the examination process, the collection process, appeal, and taxpayer advocacy rights. Now, if you still have questions after reading the notice and reviewing this Web landing page, you may call the tollfree number that is shown on the notice.

 

Summary of IRS Letter Codes

CP 2000 – This notice shows proposed changes to your income tax return. This proposal is based on a comparison of the income, payments, credits, and deductions reported on your tax return with information on these items reported to us by employers, banks, businesses, and other payers. The CP 2000 also reflects any corrections we made to your original return when we processed it.

CP 2501 – This notice is a preliminary inquiry letter and does not propose a change to tax liability. It supplies payer information and explanation paragraphs concerning the income discrepancy.

Letter 525 – This is a follow-up letter which includes the examination report. The examination report is the Form 4549 and will show the proposed tax liability.

Statutory Notice of Deficiency (Letter 3219) – This is frequently called the “90 day” letter. The certified letter is sent when the taxpayer does not respond to a notice.