AUDIT REPRESENTATION
our first contact with the Internal Revenue Service indicating that they are examining (auditing) your tax return will normally be by mail. This is true whether the tax return under audit is an individual tax return, a business tax return or a payroll tax return. If someone calls you by telephone saying your return is being audited, do not give them any information or money, as this is likely a scam.
For the past thirty years, clients have trusted us to represent them when they receive notice of their tax return that is being examined by the Internal Revenue Service. In most cases when working with us during the course of the audit, you will not have to communicate with the IRS yourself. If you have a question or need help, call us for a free confidential consultation at 1-800-408-3122 or email us at taxhelp@iowetaxes.com
Understanding Audit Representation
Also known as audit defense, audit representation is a type of tax debt resolution service. A legal or tax professional will stand in on behalf of a taxpayer during an IRS tax audit process. The IRS allows enrolled agents, CPAs, and attorneys to represent taxpayers before the IRS in income tax audits. Your audit representative is trained to develop the strategy necessary to defend your position. He or she assists you in the preparation of all documents required by the taxing authority. In many cases, your audit representative will handle all correspondence and attend all meetings on your behalf.
Why Will You Receive an IRS Audit?
The IRS audit process is designed to collect the appropriate revenue for the government and increase the nation’s tax compliance. They compute taxpayers’ deductions based on their income levels. If your deductions vary greatly from how the IRS normal computations, the chance of error on the return becomes higher. Those problematic returns are more likely to be audited. In many cases, tax laws are subject to interpretation. There is currently no perfect and/or correct tax return.
Correspondence Audits
This type of Internal Revenue Service audit is usually conducted through the mail, and includes asking for documentation related to specific items on a return.
Field Audits
A field audit is a detailed Internal Revenue Service audit where the IRS agent comes to your place of business or your home to conduct the audit.
Office Audits
During an office audit, the Internal Revenue Service agent examines the taxpayer records with an in person meeting, usually at an IRS office.
Questions You Might Have
There are many reasons the IRS may choose to look at a tax return. One common reason is the identification number (either social security number or employer identification number) associated with the tax return has income or other transactions that have been reported to IRS which they do not see on the return filed. Another common reason for an IRS audit is that a complex Internal Revenue Service computer program flagged your tax return because your return did not fall within the statistical norms for the typical return filed, and because of this they believe there is a high probability that additional taxes may be due.
The audit process is known as an examination and does not imply that you have intentionally made an error. In fact, the IRS contacts individuals for a variety of reasons.
Taxpayers are chosen through a “random selection and computer screening” process, according to the IRS, that is based on a statistical formula. The IRS compares tax returns against “norms” for similar returns. If your return doesn’t follow the “norms” you may be chosen for an audit.
If your tax filing includes transactions with other taxpayers, such as business partners or investors, and they were audited, you also may be audited.
Some returns are chosen based on other factors like income reported or unusual deductions.
Other reasons you may be audited:
Conflicting third-party reports regarding income on 1099s or W-2s
Home office deductions
Rental losses
Business use of a vehicle
Hobby-related deductions (also known as hobby losses)
Foreign currency transactions or bank accounts
The IRS can usually audit returns for three years from the due date of the return, or the date filed, whichever is later. However, in certain circumstances the IRS can go back further when they have found substantial errors. However, they normally don’t go further back than six years.
If your return has been selected for audit, the IRS will attempt to contact you initially by mail. It is important to note that audits are not initiated by telephone calls, so it is very likely that if you receive a phone call out of the blue about an IRS audit, it is likely a scam.
There are several different ways audits audits are normally conducted. Some audits are done strictly through the mail and possibly telephone calls, while other audits are in person face to face with an auditor, either at the IRS office, or the home or office of the taxpayer.
There are three main ways that an IRS audit is concluded. The first is a no change audit or that your tax return is being accepted as filed. The second way an IRS audit is concluded is that there are changes to the tax return and the taxpayer agrees with the changes. The third way an audit is concluded is that there are changes to the tax return but you do not agree with the changes.
If you agree with the IRS audit changes, you will be asked to sign the IRS examination report which states that you agree. It is important that you do not sign this form unless you are in agreement with the audit changes. If you owe money, the collection process of the Internal Revenue Service will begin, which is a totally different function of the IRS from the audit function.
If, after the IRS auditor has explained the changes to your tax return as a result of an audit you do not agree, you have several options. First, be careful that you do not sign anything indicating that you are in agreement with the audit findings. If you do not agree, you can request an audit conference with an IRS manager. If you do not get satisfaction after your conference with a manager, there are both mediation and appeal rights you can follow. It is very important that you follow all deadlines precisely to ensure that you retain all your appeal rights.
A taxpayer can represent themselves and often, especially when the situation is straightforward there may be no need for professional representation. However, many taxpayers find they end up in a much better position having professional representation and have less stress not having to deal with the IRS on their own.
Call us at 1-800-408-3122 or you can email us at taxhelp@iowetaxes.com for a free,no obligation consultation.