I received an audit notice from my state (SC) department of revenue today. They asked for clarification of my medical expenses for 2021. I made the mistake of reporting my total medical bills ($79,000) instead of actual out of pocket expenses (~8,000). I was given until September 30 to respond to the letter or it stated the item may be dissallowed. I went onto turbotax and changed the ammounts to see what the effect would be on my taxes owed. It resulted in $0 change to the amount that I would owe the state of SC. However if I ammend the return and file it with the IRS it will result in me owing $2400 plus penalties and interest (probably another $1000). My question has several parts. If I do not reply to the letter and let them make the adjustment, how long will it be (including allowed time for me to appeal) before they report their changes to the IRS? Then how long would it be before the IRS acted on the information received from the state? Im sure you can guess the reason I ask is because the 3 year time limit (usual) for the IRS to audit my return would end April 15, 2025. I hope I have provided all of the pertinent information, and appreciate any assistance that can be given in answering the question. I apologize if this seems shady or deceitful, but I did not originally file my return with any intention to defraud the government, but do not have $4,000 to pay for the mistake if I can help it.
