EIC audit

[ILLMAS]

One of my 2015 EITC client received a letter back in March 2016 informing her they were going to hold her refund until she sends support documents (a list was provided).  She brought the letter and I high lighted additional items to bring and I would write a letter once she bring me all her additional documents.  I didn't hear back from her until this past December when she again received the same letter, I went through the list and asked her to get me everything she he has access to, we were going to give the IRS everything, even DNA if necessary, last week she brought in about 80% of documents and was only pending a landlord letter stating that her children lived with her.  Today she brings in a letter dated 12-12-16 from the IRS informing her, her return will be audited and the she owes back the EITC plus penalties and interest, again the letter request support documents on the children.  She cannot owe anything since she didn't receive a refund and it makes me wonder if this is a tactic by to IRS to get her to send in proof?

[Terry D EA]

It sounds to me like our client needs to be informed of the need to timely respond to any IRS notice. You should advise her that the IRS can take the position they have taken due to non-response. Not sure about any tactics by the IRS, but she definitely needs to provide the IRS with the documents they are asking for like yesterday. I would be willing to bet that each of those letters has a respond by date. Not your problem if the client doesn't do their part. You didn't say whether you prepared the original return or not. I would be ready to supply the due diligence should the IRS ask for it. If you didn't prepare the return then no worries.

[ILLMAS]

I did prepare the return and I did collect supporting documents on the original tax return, I didn't think about the due diligence since they are not questioning me directly, but in was going to provide the info I collected for my due diligence.  

[ILLMAS]

Another note my client was informed, her EITC refund was a couple of thousands and as far as I know they also owe her 2012 or 2013 EITC but she had someone help her.