If you receive a notice of an IRS audit, you may feel overwhelmed. However, an experienced tax lawyer can help you navigate the auditing process, protect your financial resources, and give you peace of mind. Call Sodowsky Law Firm, PC today at (703) 436-1176 to find out how we can help.
What Is a Tax Audit?
When the IRS performs an audit, it investigates your finances and income to determine whether you paid sufficient taxes. There are different types of audit, categorized by the way in which the IRS conduct their investigation, including:
- Field Audit – This occurs when an IRS agent comes to your home or business to review your records. You may have an opportunity to collect necessary documents before a field audit takes place.
- Office Audit – This occurs in-person at a local IRS office. You will be required to produce evidential documents that may be related to specific aspects of your tax return.
- Correspondence Audit – This tax audit takes place in writing. The IRS will send you letters and expect a detailed response.
Depending on your case, the IRS may review your entire tax return or focus on one specific part of your filing. Frequently, an audit involves the submission of extensive information documenting your income and deductions.
An IRS attorney can help you navigate the complex aspects of a tax audit. You may be unsure of what the IRS is asking for, and how to provide them with adequate information. A skilled tax lawyer knows exactly what the IRS needs as evidence that your taxes are accurate.
The IRS Will Contact You Via Mail About a Tax Audit
During a tax audit, initial contact with the IRS will take place via mail. If you are contacted via telephone or email by someone claiming to be the IRS, it is likely a scammer. You may call the IRS or a tax attorney to verify that you are being audited. If you are informed that you owe the IRS money without an audit taking place, someone may be trying to steal your money. You should never give personal information to someone claiming to be the IRS via phone or email.
Why Am I Being Audited?
Even if you are honest and pay your taxes on time, you may be audited. However, the following circumstances increase the likelihood of an IRS audit. You:
- Are self-employed,
- Have experienced a dramatic decrease in your earnings,
- Failed to file a tax form (such as a W-2 or Form 1099),
- Claim a hobby is a business to write off expenses,
- Claim extensive food and entertainment expenses,
- Deduct a home office or vehicle-related expenses,
- Make generous charitable donations,
- Made mathematical errors on your return, or
- Have overseas or offshore bank accounts.
Other times, you may undergo an audit because of informant reports or other factors.
What Records Will the IRS Request During an Audit?
Every IRS audit is different. Depending on the scope of its audit, the IRS may request some or all of the following documents:
- Bills and proof of payments (such as canceled checks),
- Business travel logs,
- Paperwork from civil or criminal cases,
- Divorce settlements and child support orders,
- Employment documents,
- Evidence of your property acquisitions,
- Insurance claim information,
- Loan agreements,
- Medical records and associated bills,
- Receipts for business-related expenses, and
- Tax preparation documents.
The IRS also has a set of standardized questionnaires that you may receive.
While it’s best to keep detailed and organized records, it can be difficult to obtain all of this information. A tax lawyer can help you compile and organize your records, and ensure that you properly submit these documents within the IRS’ deadlines.
What Can I Do About an IRS Audit?
While you must take an IRS audit seriously, do not panic. Contact an experienced tax lawyer for help and make sure you (or your lawyer) respond to the IRS’ requests. And, if you need more time compiling your tax information, the IRS may give you an extension
Additionally, you have rights, including the rights to:
- Know why the IRS is requesting certain information,
- Know what the IRS will do with your information,
- Be informed of what will happen if you do not comply with an IRS request,
- Receive professional and courteous treatment from IRS agents,
- Privacy and confidentiality, and
- Legal or other representation.
If you are concerned that the IRS is violating your rights, contact a lawyer immediately. An attorney can help you navigate the audit system and ensure that the investigation proceeds properly.
Additionally, you have appeal rights if you disagree with the IRS’ findings. Depending on your claim, you may participate in mediation or a formal appeal to the United States’ federal courts (including the Tax Court, District Court, Bankruptcy Court, or the Court of Federal Claims). If you qualify for a Fast Track Settlement, you may be able to resolve your audit dispute within as little as 60 days. If you need help formulating your appeal strategy, a tax lawyer can evaluate your claim and tailor a plan that meets your needs.
What to Do During an IRS Tax Audit
It can be intimidating to take part in a tax audit, especially if it takes place in-person. However, you can take the following steps to make sure you remain calm:
- Do not volunteer information that the IRS does not request.
- Answer questions as concisely as possible.
- Be completely honest with the IRS during the tax audit.
- Consult with a tax attorney before, during, and after an audit.
- Speak with the IRS agent’s supervisor if you feel they are being unreasonable or unfair.
What Happens After an IRS Audit
Once a tax audit is complete, the IRS agent will give you an examination report evaluating the information that you provided. However, it can take years to obtain the report. In fact, the IRS has three years from the date you filed your tax return to give you a report.
Many people owe money to the IRS as the result of a tax audit. If you owe a substantial amount of money, you may be able to obtain a monthly repayment plan with the IRS. You may also be able to negotiate the amount that you owe. A skilled tax lawyer can help you understand your legal options if you owe the IRS money after a tax audit.
If you disagree with the decisions made by the IRS agent in the examination report, you may appeal the audit results to the IRS Appeals Office. This may require submission of additional evidence or a hearing. It can be helpful to work with an IRS attorney to optimize your response to the audit.
If you disagree with the IRS Appeals Office, you may take your issue to federal tax court. It’s important to work with a lawyer when going to court. You will be expected to submit specific documents, evidence, and argue a point at hearings. A tax attorney can guide you through this process.
Questions to Ask Your IRS Tax Audit Attorney
Before you select a tax attorney to represent you throughout an audit, you should ask questions that help you determine if they are the right person for you. Each attorney is different, and you should select one that speaks to you in a way that helps you understand your legal rights and the process you are about to endure. The following questions can help you select a lawyer to guide you through a tax audit:
- How many tax audits have you handled?
- Have you worked with auditors at local IRS agency locations?
- Have you handled correspondence audits as well as in-person audits?
- What should I do after receiving a notice of tax audit?
- What kind of information do you need to answer the IRS’ questions?
- Do I need to give the IRS field agent specific information?
- Can you represent me at every stage of the tax audit, even if it goes to court?
When you find an attorney who can answer these questions, you should work with them to manage your tax audit.
Speak With a Lawyer About Your IRS Tax Audit Today
IRS audits can be complex and time-intensive. Contact the Sodowsky Law Firm, PC for a detailed and confidential evaluation of your situation. With over forty years of legal and business experience, we can guide you through the audit process, negotiate on your behalf, and ensure that the IRS complies with federal laws and regulations.