Who is best to Represent me in а Tаx Audit?
Why cаn’t I represent myself? Why cаn’t I hаve my tаx prepаrer represent me? Cаn а relаtive who is professionаlly licensed аs аn EA, CPA, or аttorney, represent me?
These аre excellent questions thаt hаve to be аnswered when you receive аn IRS аudit notice. This is аlso true if you receive а correspondence letter from the IRS requesting аdditionаl documentаtion to support just а few items on your return!
About 1.1% of taxpayers are selected for a tax audit each year. The IRS examines tax returns to verify that the tax reported is correct. Some of those people are selected randomly, others have items on their returns which raise a red flag and trigger the audit. Whichever category you fall into, you should know your rights, know what to expect, and know that you are entitled to be represented by a tax professional that can assist you with every aspect of the audit.
Upon receiving a letter informing you of the audit, you’ll be required to phone within 10 days to acknowledge the letter and schedule an appointment. It’s important that you do this in a timely fashion. Within the letter, or during that call, you will be advised on what items are being called into question. Depending upon your ability to obtain the supporting documentation, you will make an appointment with the IRS auditing agent. You may choose to have representation before you make that appointment, because a tax specialist will advise you of the time frame you’ll need to prepare for the meeting and in most cases you do not have to appear, your representative, power of attorney, would handle the audit for you.
Continued from our prior blog post.
The Most Common IRS Red Flags that could trigger a Tax Audit:
16. Claiming 100% business use of a vehicle – When you depreciate a car, you have to list on IRS Form 4562 of what percentage of its use during the year that you claim (testify on a Federal form by your signature) was for business. Claiming 100% business use of an automobile, especially if you have no other vehicles available for use, can be a red flag; so being conservative here is advisable.
No one really wants to be audited by the IRS. It’s time consuming, and quite frankly, a headache. You’ve probably wondered at some point who gets audited and why, as well as how you can avoid it. While there is no fool-proof way to avoid an audit; however, there are ways to reduce your chances.
The IRS audits slightly more than 1% of all individual tax returns each year because they do not have the resources and personnel to examine more than that. They do, however, look to audit the returns that are more likely to uncover overstated deductions, unreported income, false claims, or taxpayers that haven’t filed tax returns in a while.
TAX AUDIT – DO IT SMOOTH
It is not uncommon for the IRS to conduct a tax audit on a company any uncalled day. The very news that the IRS would be paying a visit can cause undue, unnecessary stress for any individual/ organization. While a tax audit is just routine procedure conducted by the IRS, it has however gained a notorious reputation of being an extremely nerve wracking process for the taxpayer. To make the tax audit process an easy journey, the IRS is and has always made best of its attempt.
Amongst several factors that strike fear deep in the hearts of grown American men and women is receiving the IRS audit summons. Even if you have submitted your returns honestly and accurately, it is possible that your accounts may be subjected to an IRS audit. Though you are entitled to know why you are being audited, once you have received the audit communications from the IRS, they just can’t be wished away. You just have to buck up and handle the IRS audit to the satisfaction of the IRS and get yourself off the hook.
What is an IRS Tax Audit and Examination?
An IRS tax audit and examination isn’t fun because they will be evaluating all aspects of what you have reported on your tax returns. They have the right to do this for individuals as well as for businesses. Sometimes, there is something on a given tax return that causes them to see red flags. Others are selected at random to be inspected from top to bottom.
It can be very unnerving for an IRS tax audit and examination to occur. They will go through your personal or business tax information. They will do it with a fine toothed comb too, searching for information to verify that the tax information reported is accurate. If everything is accurate they will finish up and be on their way.
Some people get lucky and discover they are entitled to some money from the IRS. However, that isn’t always the way it works. There are more people that find they now owe the IRS more money than they thought.
IRS Audit Overview
Pre-audit Analysis
An in-depth pre-audit analysis is essential to conducting a quality examination. IRS Examiners, Revenue Agents, should prepare a comparative analysis of the taxpayer’s returns for multiple years to assist in the identification of:
• large, unusual and questionable items,
• missing schedules, statements and/or elections
• inconsistencies between different years, and
• audit potential.
A successful IRS taxpayer audit depends upon what is done before the interview. The IRS examiner should obtain as much information about the taxpayer, be organized, and prepare an interview outline that is tailored to the taxpayer under examination. As preliminary information is gathered, it should be carefully reviewed and documented for the IRS tax audit.
Did you receive an IRS tax audit for your vineyard?
Code Sec. 179 expensing has become a potent tax saver, thanks to current law’s $500,000 deduction ceiling. So it should come as no surprise that taxpayers and their advisers are on the lookout for assets that potentially qualify as Code Sec. 179 property eligible for expensing. One such class of property is vineyards and orchards. IRS has published an Audit Techniques Guide (ATG) turning a thumbs down on expensing for such property, but its conclusion appears to be based on prior law. A more recent ATG leaves the door open to a better result. This Practice Alert presents the case for treating vineyards and orchards as Code Sec. 179 property and covers IRS’s current “conflicted” guidance as well.
Do you owe back Taxes? Did you receive an audit letter from the IRS?
First, do not to panic. The IRS uses various letters to communicate with taxpayers about IRS back taxes and IRS tax audits. As with most IRS communications, there are strict deadlines associated with these letters that you have to meet. You should seriously review the items that are being challenged and prepare your factual response in a clear way to the IRS. As taxpayer, you can represent yourself, or hire a professional tax representative as a power of attorney to resolve your tax matters. Selecting a tax return for audit does not always suggest that the taxpayer has either made an error or been dishonest. In fact, some audits result in a refund to the taxpayer or acceptance of the return without change.
We represent clients before the IRS to resolve their tax controversies. The tax law is complicated and a professional will be better able to guide you through the audit experience, or to effectively resolve your back tax matter.
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