Did you get an Audit or adjustment letter from the IRS?
Absolutely do not contact them. Don’t attempt to respond to the letter in any way. Don’t call to schedule a meeting trying to figure out what the auditor will try to do prior to deciding to hire someone. That would be a very costly mistake.
The IRS auditor may try to take advantage of you by…
Fooling you into saying something incriminating. Misquoting what the tax law states. Arbitrary denying all or part of your receipts. I have seen it throughout my career. I get phone calls and emails from people telling me that even when they go to the IRS with their CPA, The IRS still turns down their receipts and enters data in their files that can hurt the taxpayer later!
The problem is… that what you do from the start can severely hurt your case.
As a CPA fighting for my clients for over 35 years… I’ve seen it happen more times than you realize. I’ve seen audits backfire for CPA’s, attorneys, and educated taxpayers. They all didn’t understand how the IRS looks at your documentation and what rules they apply to determine whether they will accept it. If you are audited, you must gain the knowledge of what your rights are, and how the IRS will respond to what you tell them and what you show them. Most of this information will be found in a guide called something like “How to represent your client before the IRS”. They are in guides that are geared toward people that represent other people. There is one shortcoming however. They are written by people who lack the required experience. It is essential that you get the additional knowledge from someone who has represented many people and businesses before the IRS.
Do you want successful results when dealing with a tough government organization like the IRS? Follow my advice
What is an IRS Audit?
An IRS tax audit is when the IRS requests that you contact them to provide proof of deductions, income, or to consider the treatment of various items on your tax returns. Many people mistakenly think that all they need to do is to bring their receipts and other information to the revenue agent as verification. What they don’t realize is that the IRS examiner is trained to ask probing questions, and to come up with reasons why your deductions are not acceptable. In fact, the professional community has complained that in a tax audit they often do not distinguish between the questions asked in a general audit vs. a criminal investigation. You will be asked financial status questions focusing on your lifestyle, standard of living, and other elements unrelated to the items on your tax return. This is one reason why even if you have receipts, and feel that your return was prepared correctly, you could still be in jeopardy. The tax code is written in a manner that leaves a lot open to interpretation. You must meet ‘purpose’ tests, and other tests that even many accountants take for granted. I have personally experienced an auditor denying deductions for my clients when I felt we had enough evidence to justify our position! So basically, any time the IRS requires you to prove something to them, you need the help of an experienced professional who knows what the law is and how to argue your position. The ability to represent your position and at the same time maintain a good rapport with an IRS exam person is essential. Otherwise the IRS Audit Tax person can and will propose adjustments against you.
Notice of Deficiency – This Is Not The End Of The Audit
Don’t be confused. The Statutory Notice of Deficiency does not require you to make an immediate payment nor is it a tax assessment. The notice is simply a proposed deficiency, which usually gives you 90 days (or 150 days if the notice was addressed to a person outside the United States) to agree with or file a petition with the U.S. Tax Court for a re-determination of the deficiency. Once issued, the time in which you must respond cannot be extended. However, during this period, you may ask for an appeal. The Notice of Deficiency can only be rescinded under certain circumstances and requires that both parties agree. Contact us if you receive this type of notice.
Once the audit is over, and you missed it. all is not lost. We can request an Audit Reconsideration. In many cases the IRS will open the audit up again, so that you can have a chance to present your proof for expenses, etc. An audit reconsideration may be requested if you subsequently obtain receipts you were not able to submit before.
I have represented people from other states without any problems. It is not necessary, or better, for the tax payer to sit face to face with an auditor to prove your income and expenses. You should not let the auditor into your home or office to conduct the audit. As a representative, I have yet to have the IRS refuse to have me send the information by mail when I have an out of town client. Locally, I don’t mind appearing with my client. We have a pretty decent audit group here in Houston.
Help Preventing an IRS Tax Audit
IRS Audit Triggers, Tax Audit Red Flags, Etc. That Increase the Odds Of Being Selected For An IRS Examination.
Exaggerated Expenses – Many common expense adjustments come from medical, travel expense, entertainment expense, meals, vehicle, office in home, and the write off of personal computers, cell phones, uniforms, rent, and contract labor. If any of these are unusually high in relation to income, it will increase your chances of an audit. Understanding what draws the attention of the IRS will help prevent audit.
Mistakes – Don’t file a sloppy, incomplete, or illegible return. The agent may become suspicious of potential criminal fraud.
Consistency – Itemized deductions such as medical, charity, employee business expense, interest, etc. all must be reasonable, and consistent with prior years.
Some IRS Audit Tax Proofing Tips on What Must Be Done.
Prepare your tax return. Sit back and analyze it. Is it reasonable to have spent the amount you did on your expense items, given your current amount of income? If not, document the return with a sworn notarized attached statement, explaining the validity and purpose of the expenses. Then look at the prior year’s tax return. Is it reasonable to go from last year’s expenses and income to this years? If not, you may want to explain a few things to avoid an audit.
Do you think they care how much they charge you with or whether you have the money to pay it or not? You will not get any sympathy. What you will get is evidence gathering and additional interest and penalties that could double your liability!
Setting up an audit, preparing for the audit, settling the additional penalties, and any audit reconsideration all require a great deal of knowledge and experience. Not reading information in an audit guide. “Because it’s not enough to just bring your receipts and canceled checks.”
What every taxpayer must do when contacted by the IRS about their tax return
You must prevent aggressive auditor abuse. If you don’t take out the time to study and learn on your own, all the things I spoke of above, hire a CPA firm with many years of successful audit experience. CPA’s are the highest level of fiduciaries; the most trusted of all professionals. I’ve helped thousands of people take control of their tax audit situation. Don’t be a victim of inexperienced advice from your regular preparer, debt relief firms, or internet blogs you read. Most advisors have no idea what it takes to correct tax adjustments, and prevent the IRS from auditing other years and charging you way more than you even anticipated. My clients brag about their amazing results, and you can too. You can contact us at 713-774-4467 or email firstname.lastname@example.org or visit http://www.taxproblem.org
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