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Tax-return audits.

May 16, 2011
Jonathan Clements, Director of Financial Education, Citi Personal Wealth Management

Got an audit notice from the IRS? Take a deep breath--and read on.

Start by studying the notice carefully. The IRS may simply want you to back up some deductions on one year's tax return or it may believe you made a reporting error--and, remember, the IRS might be wrong. On the other hand, the IRS may want to conduct a full-blown review of your tax returns from several years.

You generally have 30 days to respond, but you'll need that time, so start right away. Talk to your accountant, tax preparer or, if your case calls for it, a tax attorney. Your tax adviser can tell you what the audit means and the exact information you'll need.

Next, pull together all supporting documentation, including receipts, financial records and bank statements. You may need to contact charities, credit-card companies, investment firms and banks. This, of course, is yet another reason to keep good financial records.

Once you have the information organized, make copies of everything you will bring to your meeting with the IRS agent or that you'll mail with your response. Don't bring or mail the originals. If you aren't required to be at the meeting, you can give your tax professional power of attorney to represent you. That may take some of the emotion out of the meeting. If you owe money, pay it promptly. If you disagree with the IRS agent, you have the right to appeal to the agent's supervisor or to the IRS Appeals Division and, if need be, to the U.S. Tax Court.

INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE

The information provided is solely for informational purposes. It is not an offer to buy or sell any of the securities, insurance products, investments, or other products named.

Citigroup Inc. and its affiliates do not provide tax or legal advice. To the extent that this material or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor.

© 2011 Citigroup Inc. Citi Personal Wealth Management is a business of Citigroup Inc., which offers investment products through Citigroup Global Markets Inc. ("CGMI"), member SIPC. Citibank, N.A. and CGMI are affiliated companies under the common control of Citigroup Inc. Citi and Citi with Arc Design are registered service marks of Citigroup Inc. or its affiliates, and are used and registered throughout the world.

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