What should I do if the IRS examined and changed my federal income tax return?

IRS examination may or may not result in more tax. An examination may be closed without change or you may even receive a refund. If the IRS proposes to increase your tax, however, you have the right to appeal this decision both within the IRS and to the courts. The IRS examines tax returns to verify the correctness of income, exemptions, credits, or deductions reported on the returns. An IRS computer program selects most returns that are examined. If you agree with the results of the audit, you may sign the consent form provided by the IRS. You may pay the tax at this time, or wait until the IRS sends a bill. Interest is charged on the additional tax from the due date of the return. However, the IRS must send a bill within 30 days from the date the consent agreement is signed. If you do not agree with the examiner's report, your first option is to meet (personally or through your representative) with the examiner's supervisor to discuss the report further. If you reach an agreement with the supervisor, the case is closed. If no agreement is reached, the IRS issues a written preliminary notice of proposed adjustments 30-day letter. If you still do not agree with the 30-day letter, you have the right to appeal the findings within the IRS or to go to court. If you are eventually found to be liable for tax, you will be liable for interest on the tax deficiency and possibly penalties.
As long as your federal income tax return is examined and changed by the IRSand you owe additional tax, you must report these changes to the Dept of Rev of yur state, within 6 months of the final federal determination. If the changes made by the IRS result in a refund due from your state, you must claim a refund within two years(in the case of CA state) of the date of the final federal determination. You can use your state return Form to make changes to your already filed your state income tax return, or send copies of the federal changes to the Dept of Rev of your state.