It is very important that you not only put your case together with evidence, but that you have considered the presentation. If you do not know how to effectively communicate your defence, then the proof you have isn't as good as the paper it is written on.
Firs, you need to make sure you have selected the right person to represent you. You want to make sure that they have experience specifically with the IRS. You should also remember that lawyers, accountants and doctors are tax payers too and may be just as afraid of the IRS as you are. Meet with the person you have selected, and test their confidence. Depending on your situation, you may want an accountant, and attorney or both to represent you.
Once you have determined who will be representing you, or if you will be representing yourself, it is time to prepare the evidence. Make sure that you have found every relative piece of paper and no document is left un-turned. The IRS audit doesn't have to be stressful. A little discipline, time, preperation and knowledge should help you to relax. If you find that you, or your representation, needs more time to prepare, call the agent and ask for an extension. Extensions for IRS audits are generally granted for up to six months, but be aware that the possinibility of a second extension in very unlikely, therefore use your time wisely.
Here is the main documentation that you will need. This is a breif checklist that should help you begin yur document hunt.
Receipts to justify any deductions or credits that the IRS is questioning.
A list of the above reciepts, organized by date and include the amount and reason for each deduction.
A list, organized by date, of all cash expeditures. Treat this list as if it were a reciept for each purchase. List the reason for each expenditure.
Bank account statements organized by month and in order.
Reciepts for income, organized by date.
It is important to only present information that counters what the IRS is questioning. Do not offer up more information then needed and only asnwer direct questions with direct answers. This is one situation where more information is not better. The IRS auditor will give you the reasons for the audit, and a list of the items being audited. Prepare your defence based on that in question.
It is equally important to be well organized. You do not want the auditor to be required to dig through files to find the information he or she is looking for. This may uncover more mistakes or violations for the IRS to audit in the future.
With a little preperation and knowledge, you can get through the dreaded IRS audit.
Sunday, June 20, 2010
Thursday, June 17, 2010
Challenging The IRS Audit
The IRS has audited you and the report is now complete. Take your time, read through the report carefully and if you don’t understand it, contact your auditor. Now that you understand it, you may not agree with it. If you don’t agree with, there are some actions that you can take to appeal the IRS’ decision. First, send a protest letter to the IRS within 30 days of the receipt of the IRS Audit report. While you can use standard first class mail, I would recommend sending this certified so that you have proof that they received it, The certified letter should require a signature, avoiding later concerns that your letter for an appeals hearing is being requested too late. Once you request an appeals hearing, one will be granted with an appeals officer supposedly unbiased and from a different division of the IRS. This officer is not a part of the office that originally conducted your IRS audit.
If you meet with the officer, and still do not agree with the outcome, other steps can be taken to have your side heard. You can file a petition in tax court, which is fairly inexpensive and not that difficult. You can find helpful resources online that can aid you during this process. While you can file a petition on your own, it is only suggested to act on your own behalf if your tax bill is less than $50,000. Any amount over that and it would be worth your investment to seek the advice of a tax attorney.
As a rule, contesting your audit in court is beneficial. If you are being unjustly charged your case can be heard but beyond that you may save money simply by appealing the decision. About half of the people who file a petition in tax court end up paying a reduced penalty. While there is no guarantees, it is at least worth a shot. Reducing your tax bill, filled with fees and penalties, by only 10% can add up to significant savings. Weigh your options, the amount of time that your case will take and determine if tax court in the right decision. If tax court fails, I am sorry to report, that there is little you can do other than seek advice from a tax advisor and/or attorney. At this point you have exhausted your last method, tax court, so there may not be anything either of those professionals could do either. Good Luck!
If you meet with the officer, and still do not agree with the outcome, other steps can be taken to have your side heard. You can file a petition in tax court, which is fairly inexpensive and not that difficult. You can find helpful resources online that can aid you during this process. While you can file a petition on your own, it is only suggested to act on your own behalf if your tax bill is less than $50,000. Any amount over that and it would be worth your investment to seek the advice of a tax attorney.
As a rule, contesting your audit in court is beneficial. If you are being unjustly charged your case can be heard but beyond that you may save money simply by appealing the decision. About half of the people who file a petition in tax court end up paying a reduced penalty. While there is no guarantees, it is at least worth a shot. Reducing your tax bill, filled with fees and penalties, by only 10% can add up to significant savings. Weigh your options, the amount of time that your case will take and determine if tax court in the right decision. If tax court fails, I am sorry to report, that there is little you can do other than seek advice from a tax advisor and/or attorney. At this point you have exhausted your last method, tax court, so there may not be anything either of those professionals could do either. Good Luck!
Wednesday, June 16, 2010
IRS Auditor’s and their Attitudes
An IRS Audit is a stressful time. Your emotions may be running high. At the same time, the auditors deal with dishonest and hostile citizens everyday. While you may feel that an auditor is playing “God” because they have limited authority over you at the moment, there are some steps that can be taken to avoid a conflict which isn’t in anyone’s best interest. Also, you need to remember the position of the auditor and perhaps why he is expressing himself the way he is.
IRS auditors aren’t high paid employees, and their working environments can be stressful since they are dealing with defensive people day to day. IRS auditors are on deadlines and many times, finding the person in order to speak with them causes more and more delays, adding to their case load. Their goal is to get your case closed out as quickly as possible. Since they are underpaid and deal with other’s attitudes all day, you should expect their morale to be low.
With that said, there are ways to alleviate some of the challenge. First, don’t get upset. Try to reason with your auditor. Explain that you want to get along and assist them with getting this case closed. In the auditors mind, you are the enemy. Try changing that so that you are more of friend then a foe, helping them through their mundane and underpaid 9-5 workday.
If that attempt fails, speak kindly to the agent’s supervisor, asking to resolve the issue. Be polite and explanatory. It is the supervisor’s job, as much as it is the auditor’s to close the account. If the supervisor sees that you are attempting to work with them to get the goal accomplished, the hostilities should end.
If you are dealing with an aggressive or dishonest IRS auditor, then certainly contact the chief inspector at 800-366-4484 or write to P.O. Box 589, Benjamin Franklin Station, Washington, DC 20044-0589. This is not an interactive investigation however, and you will not be informed of the outcome. While it is rare, some auditors may imply that favors could get rid of your problem. Report this right away as it is bribery and will do nothing for your position. Either way, the best bet is to try and assist the auditor in order to get your case closed as soon as possible so that you can move on with your life and the pesky auditor will be gone.
IRS auditors aren’t high paid employees, and their working environments can be stressful since they are dealing with defensive people day to day. IRS auditors are on deadlines and many times, finding the person in order to speak with them causes more and more delays, adding to their case load. Their goal is to get your case closed out as quickly as possible. Since they are underpaid and deal with other’s attitudes all day, you should expect their morale to be low.
With that said, there are ways to alleviate some of the challenge. First, don’t get upset. Try to reason with your auditor. Explain that you want to get along and assist them with getting this case closed. In the auditors mind, you are the enemy. Try changing that so that you are more of friend then a foe, helping them through their mundane and underpaid 9-5 workday.
If that attempt fails, speak kindly to the agent’s supervisor, asking to resolve the issue. Be polite and explanatory. It is the supervisor’s job, as much as it is the auditor’s to close the account. If the supervisor sees that you are attempting to work with them to get the goal accomplished, the hostilities should end.
If you are dealing with an aggressive or dishonest IRS auditor, then certainly contact the chief inspector at 800-366-4484 or write to P.O. Box 589, Benjamin Franklin Station, Washington, DC 20044-0589. This is not an interactive investigation however, and you will not be informed of the outcome. While it is rare, some auditors may imply that favors could get rid of your problem. Report this right away as it is bribery and will do nothing for your position. Either way, the best bet is to try and assist the auditor in order to get your case closed as soon as possible so that you can move on with your life and the pesky auditor will be gone.
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