What to do when you’ve been “selected” for a federal or state tax audit
Each year, the IRS audits millions of personal (individual) and corporation (business) tax returns. If you’ve received a notice please know… You’re not alone.
For those people that have never faced agents at the IRS before, and for many that have, it can be a frightening experience.
It is said that no one need arrange their affairs to maximize the revenue to the government.
In other words, it is perfectly legal not to pay one more penny of tax than can legally be required.
An audit does NOT mean you’re a criminal.
Possible reasons and triggers for an IRS Tax Audit can include:
Missing Income – Just because a 1099 didn’t arrive in the mail, doesn’t meant you don’t have to claim the income.
Home Office Deduction – The IRS is very strict on guidelines. As a self-employed business owner, it’s important to know the rules.
Large charitable donations – The government appreciates your generosity, but keep your donations in control. The IRS believes, no one is “that” giving.
Large Operating Losses – The IRS knows (and so do we) that you don’t run a business to lose money. You want it to make money. With large losses year after year, chances are, you’re taking advantage of your expense deductions.
User Errors – When the numbers don’t add up, it’s only a reason to look further into your filings for more discrepancies. Today’s computers can identify errors in milliseconds.
Reputation of your tax preparer – The dreaded tax preparer profiling exists. If you’re using a CPA who has been audited many times in the past, chances are, you’re returns are getting a second review.
You’re a small business owner – Small businesses tend to have many advantages when it comes to tax time, except one. The IRS.
What NOT to do if you’ve been audited…
Represent yourself – Securing a well educated tax attorney can save you from disclosing or admitting information during the interview process that can be held against you later. We promise. It happens.
Ask your tax preparer to represent you – Why would you ask the person who filed your returns incorrectly or who put you at risk, to answer questions or respond to an audit?
As a tax preparer, if he or she says, “I have a lot of experience with audits”, I’d immediately hire a tax attorney and ask yourself why you didn’t ask that question BEFORE they prepared your returns.
Lie to or hold back information from an IRS Agent – As with all things in life, if you lie, most likely it will come back to haunt you.
Avoid the notices – An IRS Audit is a serious situation. It won’t just “go away”. If you’re putting the notices in the trash, expect a wage garnishment or court appearance request not soon after.
Hire a friend or family attorney – Tax law is one of the most complicated subjects governed by the United States Federal and State judicial system. With thousands, even tens of thousands of dollars on the line in back taxes and penalties, it’s important to hire “an expert”.
Make your Auditor your friend – No matter how nice you are, your IRS Auditor still has a job to do. And they will do it, no matter if you’re sweet or sour.
Communicate directly with the IRS – A phone conversation can be frightening. Be sure to create electronic or physical documented correspondence with your representative.
What a qualified, Certified Tax Attorney Specialist can do for you during an Audit:
- Review your returns proactively to spot trouble areas.
- Maintain a level playing field by matching up to the knowledge and expertise of your IRS Auditor.
- Work with you to create an audit strategy and boundaries for negotiation.
- Guide you in responding to document or information requests.
- Challenge incorrect accusations.
- Communicate on your behalf with the IRS
- Negotiate reasonable, favorable outcomes.
What can happen during an IRS Audit:
- Receive unexpected, embarrassing, disruptive “visitors” to your place of business.
- Days off the job for interviews, appearances, and other obligations.
- Freezing of financial and property assets.
- Automatic garnishments of wages.
- Requests for mountains of receipts and paperwork that can overwhelm you.
- Harassment of family members or employees.
Additional Information For Business Owners:
- If you feel your tax preparer, CPA, or Accountant may have falsely reported your income, expenses, and tax information, you may be subject to a criminal investigation.
- If you pay cash for labor and have under reported and underfunded state payroll deductions, you may be subject to a large state penalty.
- At Legacy Legal, our attorneys have extensively dealt with IRS examiners, appeals agents and collection officers. We have the education, background and experience to craft solutions that work for you.
Armed with advanced degrees in taxation and years of tax planning and tax return preparation experience, the attorneys at Legacy Legal are on your side and can provide you with the right answers and solutions that work for you.
We want a quick, favorable resolution for you. Schedule your consultation today.