IRS or State Tax Audit Representation

IRS or State Tax Audit Representation

Warning: Over 50% of the referrals that the Criminal Investigation Division (CID) receives come from Revenue Agent as part of the audit process.

Would you voluntarily get in the ring with Mike Tyson. Why? Because you would likely feel TOTALLY unprepared and consider it DANGEROUS! Make sure you understand what you are getting yourself in to. Did you know that IRS audits of people earning in excess of $200,000 have increased by 34 percent?

What is an IRS or State audit?

An IRS audit is an examination of business and/or individual accounts and financial information to ensure amount being reported on a tax return are accurate and according to the tax federal or State laws.

How is someone or an entity selected for audit?
The selection of a return for audit does not always mean that an error was found. Returns are selected using a variety of methods, including:Random selection and computer screening – sometimes returns are selected based solely on a statistical formula.

Random selection and computer screening known as the Discriminant Function System (DIF). These returns are selected based solely on a statistical formula.
Document matching – known as Unreported Income DIF (UIDIF when payor records, such as Forms W-2 or Form 1099, don’t match the information reported to IRS or the State by third parties.
Related examinations – returns may be selected for audit when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit.

Warning: The IRS selects returns for audit that have the greatest potential for additional revenue. This means they already believe the return is not accurate; otherwise they would not have selected you for examination. It is up to you to prove them wrong!

Audit Types
An audit may be conducted by mail (Correspondence) or in-person interview (Office Audit) or in the taxpayer’s home or office (Field Audit). The requested location of the audit is a good indication of the severity of the audit.

Correspondence Audits

These audits are typically to request missing documents or support for a specific item(s) on the return. Usually these audit can be concluded by providing the requested information. You may want to consult with a Certified Tax Resolution Specialist to insure what you are sending will not make matter worse.

Office Audits

These audits are conducted at the Agents office
Revenue Agents have a higher level of training in auditing techniques than a Tax Examiner (Correspondence Audit)
Revenue Agents will provide a list of requested documents and supporting items requested. You should consider seeking the representation of a Certified Tax Resolution Specialist!

Field Audit

These audits are conducted at the taxpayer home or office and/or business
They are typically conducted by Agents that have multiple years of experience.
Revenue Agents will provide a list of requested documents and supporting items.
Field audits should be limited in the score.
You should definitely seek representation!.

Note: All audits should be taken seriously because they often lead to review of additional tax years and the examination of other deductions not originally indicated.
Audit Notification
Should your account be selected for audit, you will be notified in one of two ways:

By mail
By telephone

Note: The IRS MUST notify you, in writing, at you last known address. We have seen cases where the taxpayer was audit and they never knew it because they have not filed a return in years and the IRS notified them at their “last Known Address”. Also know the IRS does not use email!

Your Rights During an Audit
Publication 1, Your Rights as a Taxpayer, explains your rights during the examination as well as your right in appeal, collection, and refund processes. These rights include:

Right to professional and courteous treatment by IRS employees.
Right to privacy and confidentiality about tax matters.
Right to know why the IRS is asking for information,
Right to know how the IRS will use the information provided.
Right to know what will happen if the requested information is not provided,
Right to representation,
Right to appeal disagreements, both within the IRS and before the courts.

Note: Just because a taxing authority has decided to audit you, does not mean you have to roll over or and be pushed around. Every taxpayer has the fundamental rights of due process, fairness and representation- even if the auditor "forgets" to explain this to you.

WE KNOW YOUR RIGHTS INSIDE AND OUT. WE KNOW HOW TO PRESERVE THOSE RIGHTS AND "WORK" THOSE RIGHTS TO YOUR ADVANTAGE.

Audit Length

The length of the audit varies depending on the following;
Type of audit (Correspondence, Office Field),
The complexity of items being reviewed,
The availability of information being requested,
The availability of both parties for scheduling of meetings, and
Your agreement with the findings.

Audit Interview

The IRS will start the audit process with 54 seemingly innocent sounding interview questions. Your response to these questions will dictate your fate for the rest of the Exam. You MUST answer these truthfully! Answer these question truthfully WITHOUT raising any red flags is the trick. Most people (without proper representation) either are not truthful in their responses and/or worse yet "talk too much". Or they incriminate themselves!

Warning: If you choose to go at it alone and handle the IRS Audit yourself, you will likely get creamed It's like going to court without a lawyer and worse yet, the fear that your case may be referred for criminal prosecution should be reason enough to seek help.

Records Needed

You will be provided with a written request for specific documents needed.
You will typically be asked for bank statements for a specific period of time.
You will typically be asked to provide supporting documentation for specific items listed on the return(s)

Audit Determinations

An audit can be concluded in four ways:

No change: an audit in which you have substantiated all of the items being reviewed and results in no changes.
Agreed: an audit where the IRS proposed changes and the taxpayer understands and agrees with the changes
Some combination of the above two items.
Disagreed: an audit where the IRS has proposed changes and the taxpayer understands, but disagrees with the changes.

At Legacy Tax Resolution Services, LLC, our goal for our clients is to obtain "No Change" letter (if appropriate) or make certain, that if there is additional tax to be assessed, that is the lowest amount under law. If you are audited you need HELP! PERIOD!

What Happens When You AGREE With The Audit Findings?

If you agree with the audit findings, you will be asked to sign the examination report or a similar form depending upon the type of audit conducted. If money is owed, there are several payment options available. Publication 594, The IRS Collection process, explains the collection process in detail.Please understand that should this happen that you still have all of the normal tax resolution methods available to you (Payment Plans and Installment Agreement, Offer In Compromise and Penalty Abatement) available to you.

What Happens When You DISAGREE with the Audit Findings?

A conference with a Auditor’s Manager may be requested to discuss items of disagreement before the conclusion of the audit. If this is unsuccessful, you have right to appeal the determination.
What are the risks of not having expert representation?

Due to budget cutbacks and draw-downs, many 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 deficit- 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

Audit Reconsideration

Ultimately, this can cost you thousands of dollars. Remember, in addition to any "findings" by the auditor of unpaid taxes, you will also be assessed interest and penalties. Do not take chances...hire an expert who will vigorously and objectively defend your rights!

Legacy Tax and Resolution can take your case, process and file the appropriate forms and help mitigate any collections against you. Call Legacy Tax and Resolution NOW

For more information on Audits and Examinations, see Frequently Asked Questions- IRS Audits

If you feel that you can handle this on you own but perhaps need some guidance, check out our DIY site for the

DIY Represent yourself in an IRS Audit Guide

If you feel like you’re in over your head and need representation, check out the link below. There you will be able to reach out us for one of our Tax Resolution Specialists to take this burden off your hands