Federal Tax Audit

For more information, please see:

• What can I expect in the audit process?
• What is required during an audit?
• Why am I being audited?
• Should I have my CPA represent me in an audit?
• About Criminal Taxes

 

If you have been selected for an audit and have reason to believe:

• You may be subject to criminal prosecution.
• The information contained on your return for the year selected is false or has become false.
• The income on your return is understated.
• The deductions taken on your return are overstated.
• You are a business and pay a large amount of workers in cash without making proper payroll tax withholdings.

 

Please click here, http://www.irssolution.com/criminal-taxes.php.

 

Receiving an audit letter from the IRS is a frightening proposition for many tax payers. Often individuals experience feelings of fear, helplessness, frustration, or are shamed by the suggestion that the information they have provided on their tax returns is not accurate. Furthermore, audit letters are often accompanied by a multiple page request for documents, which often ask for records that are several years old. Taxpayers often equate the experience of being examined by the IRS with being questioned by the police about the commission of a crime. Because our clients are often frightened by the prospect of an IRS audit, we want to stress that even though you are being audited by the IRS, this does not mean you have done anything wrong.

What is an Audit? 

An audit is a screening process that the IRS uses to gather information about groups of taxpayers and their income and expense habits to ensure that taxpayers are being compliant with the Internal Revenue Code and to ensure that the information you provided to the IRS was accurate. Although the IRS suspects wrong doing in some of the returns it audits, most of the time the Revenue Agent is simply checking for accuracy. In most cases, the taxpayer has little to worry about. However, nervousness may cause you to say the wrong thing to the auditor, which can expose yourself to more potential liability. In addition, some Revenue Agents are overzealous in their examination and may take advantage of your unfamiliarity with the audit process. The most common mistake that taxpayers make is providing the IRS with too much information, thus launching a fishing expedition into multiple years of tax returns and areas that are outside the initial scope of the audit. This mistake can ultimately cost you lots of time and money when you receive your final examination change report.  

Your Rights in an Audit 

Simply because the IRS has decided to audit you does not mean that you have to bend to the Revenue Agents whim or have to be pushed around by extensive Information Document Requests (IDRs). Every taxpayer has the fundamental rights of due process, fairness and representation - even if your Revenue Agent "forgets" to explain this to you. Be firm with any tax auditor regarding your rights and behave in a professional and courteous manner. Do not let the auditor confuse you and make sure he or she explains everything fully. 

Why Hire Professional Legal Help? 

Hiring an experienced tax firm to represent you in an audit has several key advantages.  

Expedite the Process

Although there is a common misconception that hiring an attorney signals guilt, most Revenue Agents prefer working with experienced counsel. Having experienced counsel can help expedite the audit process.  Having someone familiar with the audit process is easier to deal with for the Revenue Agent and removes much of the emotion associated with your intimate financial details. This shortens the audit process and saves you both time and money.    

Existing Relationships with the Revenue Agents

Another benefit from having experienced counsel is that there is a high probability that local counsel has dealt with the Revenue Agent, his or her manager, or others in the department and such existing relationship can help facilitate the audit.  

Limit the Scope of Your Audit 

Experienced counsel can often limit the scope of the audit to one year, rather than a general fishing expedition through multiple years.  Experienced counsel is also often able to identify problem areas with the return through their own internal investigation.  This internal review allows counsel to tailor responses to the Revenue Agent’s questions, and ultimately may avoid or minimize exposure to tax deficiencies and the opening of other years. 

Overall, we generally recommend that you retain counsel to guide you through the audit process. Although there are costs associated with hiring representation, they are normally worth the investment as it helps to minimize your overall liability and shortens the audit period. A few thousand dollars in legal fees can save your tens of thousands in tax deficiencies. However, whether retaining counsel is right for you is a case-by-case decision and we encourage anyone selected for audit to contact our office. Your initial consultation with us is always free. In addition, our breadth of audit experience in taxation can provide our clients with a wealth of insight on how best to handle their audit and limit their exposure. We will guide you through the process and explain step by step what is needed and why. Our firm has a good working relationship with the audit groups and can use to your advantage. In the majority cases, you will not have to meet with the auditor and we will handle the entire audit process. 

• Typically, correspondence audits are for missing documents in your tax return that IRS computers have attempted to find. These usually include W-2's and 1099 income items or interest expense items. They can also include smaller categories that the IRS is simply trying to verify.


• This type of audit is usually handled through the mail with the correct documentation. If you can not justify your deductions or income, the audit may be expanded.


• We can help you in answering the request and by keeping in contact with the examination department

• The IRS office audit is usually with a Tax Examiner who will request numerous documents and explanations for various deductions.


• This type of audit may also require you to produce all bank records for a period of time so that the IRS can check for unreported income.


• This type of audit should be taken more seriously due to the fact that the IRS auditor is a Revenue Agent.


• Revenue Agents receive more training and auditing techniques than a typical Tax Examiner.

 

• These take place at your home, place of business, or qualified tax representative's office.


• These are the most thorough and comprehensive types of audits often spanning multiple days and through multiple years.


• The IRS Revenue Agents who conduct field audits are the most experienced and most highly trained. Many have a background in accounting or fraud examination.

• Due to budget cutbacks, many government auditors may not have the time necessary to perform a comprehensive review of all appropriate documents


• The auditors function is to ensure compliance with the law.


• However, assessments made as a result of the audit help to fund the government. Due to this inherent conflict in the auditor’s role, it is difficult for the auditor to be objective and ensure the taxpayer’s rights are fully protected. The auditor naturally feels a loyalty to the IRS and to the government.


• It is relatively common for an auditor to ask the taxpayer for information and not explain how the information will be used, or worse yet, not explain what will happen if the taxpayer cannot provide the information. Most taxpayers have no familiarity with the audit process. The auditor is aware of this and may use it to their advantage.


• In either case, this can lead to an erroneous conclusion on the part of the auditor and result in an incorrect assessment. The IRS may also assess large penalties in addition to charging interest.


• This can cause your tax liability to significantly increase