If you’ve received notice that you’re being audited by the IRS, the best thing you can do is start preparing. Being well-prepared with the aid of legal representation can make a critical difference in the final assessment. Your preparation begins the moment you receive notice of the IRS audit by organizing your financial records and retaining legal representation. Your method of preparing will also depend in part on the type of audit you’re subject to. As a rule, correspondence audits are less stressful than office or field audits and require less preparation.
The Law Office of Jin Kim represents clients under audit by the IRS and California tax agencies. To learn more about her services and flat-fee options call her office at (916) 299-9913 for a free consultation.
Reviewing Your Tax Return
You should be familiar with the tax return (or returns if there are many) subject to the audit. The IRS notice will inform you of the years for which you are being audited unless you’re subject to a field audit, in which case everything is fair game. If you did the returns yourself, one helpful tip is to engage the services of a tax professional such as a CPA or tax lawyer to look over possible issues and identify problematic areas.
On the other hand, if the tax return was prepared by someone else, you should at least go over it with the tax preparer so that you fully understand the tax return. There’s nothing worse than appearing uninformed about your tax returns once you’re at the office. The auditor assigned might take this as a sign that you’re hiding something or understated your tax liability. If you have the finances for it, it’s a good idea to hire a tax lawyer to represent you throughout the IRS audit.
What Does An Audit Defense Attorney Do?
In general terms, a tax attorney who defends clients facing audit will begin by evaluating the return and consulting with the client. Under the protection of attorney-client privilege, the attorney will better understand what happened during the tax years under audit. Thereafter, the attorney may review the client’s supporting evidence to substantiate the income and expenses claimed in the return. From there, the attorney will develop a strategy that seeks to mitigate negative outcomes in line with supporting evidence and tax law. The tax audit defense attorney will work toward presenting that position and evidence during the audit.
What Self-Represented Taxpayers Risk During An Audit
When individuals under audit decline to hire a tax attorney, they risk the possibility of inadvertently disclosing damaging information or, even worse, evidence of tax crimes. In milder situations, unrepresented taxpayers are more likely to fail to substantiate information on their returns, leading to the assessment of additional tax liability, interest, and penalties.
Organize Your Records
IRS agents themselves admit that the most common problem in audits is poor record keeping. If you have a habit of meticulously keeping records, then this is good news for you. The IRS agent will expect you to bring relevant records – but don’t bring them all out at once. Bringing documents unrelated to the returns being audited might extend the audit to other years not included in the notice.
If your records are lost or missing, don’t despair. There are plenty of ways to address this issue. One solution is to reconstruct the records to the best of your ability – but you should inform the auditor that these records are reconstructed.
Organizing and supplying records to support the information on your return is a critical step in any audit, and it’s also one that’s potentially detrimental and certainly risky. In every case, it’s strongly advised to have your own tax attorney review these records before disclosing them to the IRS examiner.
Do I Have To Appear Personally?
Whether you have to appear personally will depend upon the type of audit. If it’s a correspondence audit, no; you will mail in your documents. If it’s an office audit, you can send a representative in your stead, but we suggest that the representative should be someone qualified to represent you – such as a tax lawyer or an accountant. IRS examiners won’t think that it’s suspicious if you don’t appear personally, so long as you send a qualified representative. The IRS understands that tax issues might confuse people, so it’s perfectly normal to bring a representative or send a representative.
Mitigate Tax Liability; Limit The Scope
Ideally, there are two goals in every audit. The first is to minimize any tax liability. While we might hear of people receiving refunds from the IRS, those are cases often the exception to the rule. Most people who are audited do pay a tax bill. Your goal should be to minimize the amount you pay as much as possible. The second is to prevent the audit’s expansion to other years that were not included in the original notice. Again, a tax attorney can help you contain the scope of the audit.
- What is the Trust Fund Recovery Penalty? - August 25, 2022
- CDTFA Notice of Levy - August 8, 2022
- The Statute of Limitations on Deficiency Assessments - June 2, 2022