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.
Representation can be from a tax controversy specialist, an Enrolled Agent, a CPA, or a tax attorney. Whomever you choose will help you reconstruct your records, represent you before the IRS, and ensure your rights are upheld.
Here are the basics you should know about an audit. First, you, as a taxpayer have rights. This overview of your rights is directly from the IRS.gov website:
The IRS trains its employees to explain and protect taxpayers’ rights throughout their contacts with taxpayers. These rights include:
• A right to professional and courteous treatment by IRS employees.
• A right to privacy and confidentiality about tax matters.
• A right to know why the IRS is asking for information, how the IRS will use it and what will happen if the requested information is not provided.
• A right to representation, by oneself or an authorized representative.
• A right to appeal disagreements, both within the IRS and before the courts.
While these are the stated rights, sometimes the IRS Auditor may forget to explain some of the above. This is where representation is extremely helpful. You probably aren’t an expert on taxes, audits, or tax law; but your representative should be. I can say with confidence that as an IRS licensed enrolled agent, I do know your rights, and I know how to make sure you get every advantage those rights can afford you in an IRS Tax Audit.
Types of IRS Tax Audits
You’ve probably heard the term “tax audit” several times in your life, but what you might not know is that there are different types of audits that are performed.
By Mail: An examination may be conducted by mail in which case the records in question are requested, you supply them by the due date and the audit is performed by the IRS Auditor. A tax representative can walk you through this providing additional advice or documentation, as needed.
An In-Person Interview: In this instance, you are called into the IRS office to talk with the agent and bring your records for examination. You have the right to representation during the process.
An Audit at Your Home or Business: This is generally the most thorough and the most serious audit type. If you are in this category, you will definitely want a tax specialist on hand for representation.
For in person interviews, the taxpayer may make an audio recording of interview provided the IRS has advance notice. If the time, place, or method that the IRS schedules is not convenient, the taxpayer may request a change, including a change to another IRS office if the taxpayer has moved or business records are there.
Taxpayers may act on their own behalf or have a representative or a tax specialist accompany them. If the taxpayer is not present, the representative must have proper written authorization, power of attorney form 2848. Selecting a return for examination does not always suggest that the taxpayer has either made an error or been dishonest. In fact, some examinations result in a refund to the taxpayer or acceptance of the return without change. In other instances, the auditor will explain the adjustments the recommend, an agreement is reached for payment, and that is the end of it.
You have the right to an appeal if you don’t agree with the audit recommendations. Your appeal rights should be explained by the examiner at the beginning of an audit. An appeal can take the form of a supervisory conference with the examiner’s manager, or you can have an administrative appeal within the IRS, the U.S. Tax Court, U.S. Claims Court or the local U.S. District Court.
You have 30 days after the appeal, if no agreement is made, to consider the adjustments and your next course of action. If no response is sent to the IRS within the 30 day window, they will issue a statutory notice of deficiency which then gives you 90 days to file a petition with the Tax Court. Claims Court and the District Court generally do not hear cases unless the tax has been paid and an administrative refund has been denied by the IRS; however, the tax does not have to be paid for an appeal to be heard within the IRS or in Tax Court.
Need Help with an IRS Tax Audit?
As an IRS licensed, enrolled agent, I can work with you to minimize the frustration and anxiety an IRS Tax Audit can cause. I have the experience and expertise to help you navigate an audit, whether it’s conducted through the mail or in person. I will ensure your rights are protected during the audit process and advise you on the best options, given your particular circumstances.
Our firm has an “A+” rating with the Better Business Bureau, Endorsed Local Provider by Former Dave Ramsey ELP 2012-2019, and all cases are personally handled by the principle of the firm, Mike Habib (EA). To discuss your situation, please contact our tax firm for a free tax consultation at 877-788-2937.
We provide professional IRS tax audit representation in all 50 states including Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Guam, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming.