Let the Taxpayer Beware

Navigating the Rise in Tax Agency Notices: What You Need to Know

In recent years, federal, state, and local tax agencies have adopted a more proactive—and sometimes aggressive—approach to addressing potential discrepancies in taxpayers' filings. This shift is fueled by the increasing use of artificial intelligence (AI) and big data analytics to review tax information, often flagging anomalies or trends that previously went unnoticed. While these technological advances can be beneficial, they also come with a significant downside: an avalanche of notices in taxpayers' mailboxes.

Why Are Tax Notices Increasing?

Part of this phenomenon stems from a philosophical shift by tax agencies. They are now more inclined to issue a notice even if the issue is less than 100% certain. This strategy mirrors how businesses like yours and ours are utilizing AI to uncover patterns and unexpected results in data. Unfortunately, without some level of oversight on the part of agency employees, the outcome is often a notice sent to you, the taxpayer, even when there’s little or no actual issue to address.

While the agencies’ ability to catch legitimate discrepancies has likely improved, this doesn’t mean you or your tax professional are suddenly making more mistakes. Many of these notices are based on misinterpreted data, overly conservative assumptions, or even so-called "fishing expeditions" where agencies are simply looking for possible issues.

The Impact on Taxpayers and Tax Preparers

Receiving a notice from the IRS or a state tax agency can be unsettling, leading some to question the accuracy of their filings. But it’s important to recognize that the rise in notices doesn’t equate to a decline in accuracy. Rather, it’s a natural outcome of agencies casting a wider net.

For tax professionals, this increase in notices presents challenges. Each notice requires careful analysis, research, and response—activities that consume time and resources. In some cases, it might seem easier to pay a small balance due, even when the notice is likely incorrect, simply because the cost of disputing it is greater than the proposed change.

Our Commitment: Tax Audit Representation Reassurance (TARR)

At BDCo, we understand the frustration and confusion these notices can cause. That’s why we’ve developed our Tax Audit Representation Reassurance (TARR) service. By adding a fee to your current year's tax return preparation fees, TARR is designed to work as a "reassurance" policy, giving you peace of mind by ensuring that any notices, no matter how small, are addressed without additional charges to you.

With TARR in effect for a tax period, our experienced team will:

Analyze and respond to all tax notices you receive for the covered period.
Provide clear explanations of the issue and its resolution.
Advocate on your behalf to ensure agencies understand your circumstances.
Represent you before tax agencies under a full or targeted audit.

By layering this service onto your regular tax preparation, you can focus on what matters most to you, knowing that any tax notice, whether a minor misunderstanding or a major inquiry, will be handled professionally and efficiently.

Supporting Our Customers

Our goal is to educate our customers about this growing trend and alleviate unnecessary concerns. The reality is that tax notices are becoming more common, but that doesn’t mean you—or your tax preparer—are at fault. If you receive a notice, don’t panic. Instead, reach out to us, and we’ll ensure the issue is addressed with the attention it deserves.

Through services like TARR, we aim to provide both reassurance and practical support in navigating this new era of AI-driven tax reviews. Together, we can face these challenges with confidence and clarity.