Did you receive a notice from the IRS or state tax bureau informing you that you’ve been selected for an audit? Whether a correspondence audit or a meeting with a government auditor, the process can be exhausting and stressful, and it is often advisable to retain a professional to represent you. Failing to address an audit with a strong tax defense can result in wage garnishment actions, bank levies, and other financially adverse IRS tactics.
Why am I being audited?
A percentage of audits are completely random – there is no reason and it happens to be your turn. Your chance for being selected will increase as your income reaches higher levels, or if you are self-employed. Sometimes, a return is selected for audit because the information reported by the taxpayer does not match information on file with the IRS – usually an omitted or flawed 1099 that was filed by a financial institution or employer (this situation usually leads to a correspondence audit).
In most cases, a tax return is selected for audit by IRS computers. Every tax return is assigned a DIF score – a numerical probability that errors or omissions have occurred, and an audit is likely to result in a higher tax balance. Potential red flags generally consist of unusually high expenses listed on Schedules A and C, rental expenses that equal or exceed rental income reported on Schedule E, or expenses claimed for business use of a home or vehicle that seem unreasonably high. In recent years, it has become very common to see returns feature expenses that were fabricated by an unscrupulous tax preparer hoping to produce a larger refund, from which the preparer keeps a commission.
What should I do?
You must respond to the audit notices and attend the audit. If you fail to respond, each and every expense or deduction you claim will be disallowed and your tax will increase – plus penalties and interest. The auditor will request bank statements, invoices, mileage logs, etc., but your best bet is to organize the evidence and provide legal justification for the deductions. We can help you prepare your case and squeeze every last penny out of the audit. Additionally, we can help negotiate reduction or removal of penalties on any additional tax assessed.
What if I don’t agree with the results of my audit?
When the audit is finished, the auditor will provide you with an audit report and ask you to sign a document indicating that you accept the changes. If you do not agree with the audit results, you have 30 days to request an appeal. If 30 days have already elapsed, you will receive a Notice of Deficiency which gives 90 days to submit a U. S. Tax Court petition and take the case to trial. In such cases, you should not take on the IRS alone. Please contact our office to review your case and determine your best course of action.
I didn’t attend my audit, but have records. What can I do?
Yes. In this case, the tax has already been assessed and you’ve missed your window to appeal or go to Tax Court. However, you may still request an Audit Reconsideration. The process for audit reconsideration is very much like an audit, but the auditor will not provide as much time as what would have been permitted the first time around. It is imperative that you make the strongest possible case from the outset, and the Law Offices of Robert Hoffman can help organize and present your case in a way that ensures the best possible result.