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.
Showing posts with label Cheap IRS Representaion. Show all posts
Showing posts with label Cheap IRS Representaion. Show all posts
Sunday, June 20, 2010
Tuesday, August 11, 2009
What Should I do if I get Audited by the IRS?
The first thing that you should do is to remain calm. Too many times, taxpayers act in haste and make more mistakes then are already at the table. Just because you were selected for an audit doesn’t mean that you did anything wrong. It also does not mean that you need to shell out thousands of dollars for a professional, depending on your situation of course.
You can represent yourself in an IRS audit. You may be audited by mail or with a field audit. In any event simply provide the documentation in an orderly fashion as it is asked for. Answer promptly but allow yourself the time to gather the documentation that is needed. Request more time respectively if required but make sure that the request isn’t due to procrastination. Once you find the documents requested, do not send them in out of order. The auditor will assume that the disorganization of the documents represents the way in which you day-to-day business is handled and may result in a larger scope investigation.
After you take your time to assemble the documents in a neat and orderly fashion, deliver them to the IRS auditor or mail them in promptly. Never volunteer more information than is being asked for. This will likely lead into a more complicated audit. Be friendly, but concise. Also, try to not allow the agent to come to your home or place of business. IRS auditors are trained to view the return and your surroundings to see if you are living beyond your means. Inviting them into your home or business could result in a larger investigation as well.
Once all documents have been sent and the audit comes to a close, you will have a report that gives you the results of the investigation. Never sign anything before you understand it. Again, take your time before any agreements and seek professional advice if needed. If you will be seeking the advice of a tax professional, let the auditor know that and inform him that you will get back with him promptly. If you have documents that dispute the findings, such as case law or tax code, contact the auditor’s supervisor and come back to the table. If you still do not agree with the findings, you may appeal the decision or take the findings to tax court. Either way, do not fret, as the report isn’t the end of the rope.
You can represent yourself in an IRS audit. You may be audited by mail or with a field audit. In any event simply provide the documentation in an orderly fashion as it is asked for. Answer promptly but allow yourself the time to gather the documentation that is needed. Request more time respectively if required but make sure that the request isn’t due to procrastination. Once you find the documents requested, do not send them in out of order. The auditor will assume that the disorganization of the documents represents the way in which you day-to-day business is handled and may result in a larger scope investigation.
After you take your time to assemble the documents in a neat and orderly fashion, deliver them to the IRS auditor or mail them in promptly. Never volunteer more information than is being asked for. This will likely lead into a more complicated audit. Be friendly, but concise. Also, try to not allow the agent to come to your home or place of business. IRS auditors are trained to view the return and your surroundings to see if you are living beyond your means. Inviting them into your home or business could result in a larger investigation as well.
Once all documents have been sent and the audit comes to a close, you will have a report that gives you the results of the investigation. Never sign anything before you understand it. Again, take your time before any agreements and seek professional advice if needed. If you will be seeking the advice of a tax professional, let the auditor know that and inform him that you will get back with him promptly. If you have documents that dispute the findings, such as case law or tax code, contact the auditor’s supervisor and come back to the table. If you still do not agree with the findings, you may appeal the decision or take the findings to tax court. Either way, do not fret, as the report isn’t the end of the rope.
Wednesday, August 5, 2009
Bill of Rights during an IRS Audit
It used to be that the IRS had a final say and a lot of rights when it came to the power over the U.S. Taxpayers. Today however, the rights of taxpayers have been increased through the Taxpayer Bill of Rights. The first act was instituted in 1989 and the second was enacted in 1996. The last of the three was implemented in 1998. While it has always been an expectation that the IRS would deal with taxpayers in a professional manner, they must now also follow another set of code of conduct policies.
Remember the following information and certainly appeal or complain if the IRS does not follow these guidelines.
While this is an abbreviated overview of the IRS tax payer's Bill of Rights, many of them can help and possibly prevent you from owing the IRS an enormous amount of penalties and fines after the IRS Audit. It is important that every citizen get treated fairly and equally. It is important that you always know your rights when dealing with an IRS Audit.
Remember the following information and certainly appeal or complain if the IRS does not follow these guidelines.
- First, the IRS must give you the tax information and any help that you need in order to comply with the IRS tax laws.
- The IRS must always ensure your personal and financial confidentiality.
- They must treat you in a courteous manner.
- The IRS must provide clear explanations in any tax notice or mail inquiries and provide additional information as requested.
- A non-technical statement of your taxpayer rights and information pertaining to the IRS collection and tax appeals procedures is required to be placed in all correspondence during an IRS audit.
- The IRS must collect the tax fairly. If the IRS threatens to collect in a manner that will cause you significant hardship, you can apply for a Taxpayer Assistance Order by filing IRS tax form 911 with an IRS Problem Resolution Office in the IRS district where you live. While your filed 911 form is being reviewed, the tax collections and enforcements will be suspended.
- The IRS must agree to a (3) year installment payment schedule if the taxpayer owes $10,000 or less, exclusive of interest and penalties if requested and certain conditions are met.
- Approval from a supervisor must be acquired before the IRS can file a tax lien or levy and the IRS must provide notice, which includes the amount of tax owed, the IRS’ proposed action, and notify the taxpayer of their right to a hearing within (30) days within (5) business days of such action. The tax notice must also include the IRS levy procedures, the availability of IRS administrative appeals, the IRS appeals procedures, and the alternatives to the proposed tax levy such as an installment agreement and the rules for obtaining a release of the tax lien.
- Certain properties are exempt from IRS seizure under the taxpayers Bill of Rights.
- Legal costs may be recovered if you win in court against the IRS and the burden of proof may shift to the IRS during court procedures with respect to factual issues relevant to determining tax liability. The IRS must also issue a tax refund of overpaid tax and must provide at least 30 days notice prior to altering, modifying or terminating and installment agreement.
While this is an abbreviated overview of the IRS tax payer's Bill of Rights, many of them can help and possibly prevent you from owing the IRS an enormous amount of penalties and fines after the IRS Audit. It is important that every citizen get treated fairly and equally. It is important that you always know your rights when dealing with an IRS Audit.
Sunday, August 2, 2009
How Large Deducitons Play into IRS Audits
If you anticipate claiming large deductions, there is nothing wrong with that as long as you have the receipts to prove it. If your tax deductions exceed the average amount of deductions for your income level, then you may get audited. Additionally, if you have an excessive amount of itemized deductions, you may fall into a high-risk category therefore raising your chances of getting audited. While the formula used is secret, we do know that a large amount of Itemized Deductions places you in the higher probability category.
When you file your return with the IRS, a secret computer score, known as the Discriminate Information Function (DIF), is immediately used to determine whether additional taxes, fees, penalties or fines could be collected. If the DIF score returns high, you are more likely to receive an audit.
An area that most taxpayers don’t even think about as being a high-risk error in reporting, that may get them audited, is the failure to report alimony as income. When a former spouse pays the alimony, they claim it on their taxes. Likewise, you should also claim it as income. Failure to do so will result in a high-risk score, and we know what that means by now. Since the other party generally reports it, catching such errors is relatively easy.
The IRS doesn’t usually just pick taxpayers to audit. Since the IRS has little resources and to boot, they are understaffed, choosing returns that will yield the highest rate of return in the way of fines and penalties is essential. The IRS has budgets and expenses, like any other business; therefore they must cover their expenses without passing the costs of doing so on. There is a fine balance between not allowing people to get away with underpayments, which would bankrupt our system, but on the other hand not spend the taxpayer’s money frivolously. This is why the IRS has the computer system and formula available to them, to ensure that they are auditing cheating taxpayers where money is available. While it may not be ideal, an audit may be scary, and it certainly isn’t pleasant, if the IRS did not put in place checks and balances imagine what that would do to our taxes. Our individual taxes would continue to rise until the system would entirely break, leaving the taxpayers without the common things everyday that we take advantage of paid for by tax dollars. No one would be afraid of the repercussions of being dishonest on their tax returns, and very little would pay.
When you file your return with the IRS, a secret computer score, known as the Discriminate Information Function (DIF), is immediately used to determine whether additional taxes, fees, penalties or fines could be collected. If the DIF score returns high, you are more likely to receive an audit.
An area that most taxpayers don’t even think about as being a high-risk error in reporting, that may get them audited, is the failure to report alimony as income. When a former spouse pays the alimony, they claim it on their taxes. Likewise, you should also claim it as income. Failure to do so will result in a high-risk score, and we know what that means by now. Since the other party generally reports it, catching such errors is relatively easy.
The IRS doesn’t usually just pick taxpayers to audit. Since the IRS has little resources and to boot, they are understaffed, choosing returns that will yield the highest rate of return in the way of fines and penalties is essential. The IRS has budgets and expenses, like any other business; therefore they must cover their expenses without passing the costs of doing so on. There is a fine balance between not allowing people to get away with underpayments, which would bankrupt our system, but on the other hand not spend the taxpayer’s money frivolously. This is why the IRS has the computer system and formula available to them, to ensure that they are auditing cheating taxpayers where money is available. While it may not be ideal, an audit may be scary, and it certainly isn’t pleasant, if the IRS did not put in place checks and balances imagine what that would do to our taxes. Our individual taxes would continue to rise until the system would entirely break, leaving the taxpayers without the common things everyday that we take advantage of paid for by tax dollars. No one would be afraid of the repercussions of being dishonest on their tax returns, and very little would pay.
Thursday, July 30, 2009
IRS Audit Representation
If you decide that you need to enlist the help of a representative, there are some items that he/she should be taking care of. For example, the representative should be able to handle your audit in such a way as to limit your exposure. The less the auditor sees of you and your business means the less vulnerable you are to further probing. Additionally, the representative should lower the risk of the auditor probing into higher risk areas, other than the specific requests for documentation made in the initial audit notification.
Tax laws are quite complex and many are left open to interpretation. With that said, a representative should be able to limit the scope of the auditor’s investigation. For example, an auditor may request to look at material deductions. The representative’s job should be to limit what the auditor considers “material” to a dollar amount with the highest threshold possible. Perhaps the representative, through the use of interpretation, can convince the auditor to examine all documents, which have a higher value than $1,000. The less documents that have to be produced is limiting your exposure and preventing you from being audited any further.
Since an auditor can go back and request prior years tax returns and documentation, it is important to produce the documents requested, and only those listed, in a timely and organized fashion. The representative should appear professional and well organized. The more timely you are in your replies and the more organized you present it, the more likely the auditor will assume that your business is handled professionally and with scrutiny.
If you choose to handle the audit without a representative, there are some tips to consider. Never leave your original documents with the IRS, never give the IRS agent more or less information than what is requested, be organized, respond timely, answer questions honestly but briefly, do not argue or be belligerent, insist on getting copies of information in their files and of anything you sign. If you have a representative accessible, have them review any documents prior to signing them. Having a representative is up to you, but being informed either way is essential.
Tax laws are quite complex and many are left open to interpretation. With that said, a representative should be able to limit the scope of the auditor’s investigation. For example, an auditor may request to look at material deductions. The representative’s job should be to limit what the auditor considers “material” to a dollar amount with the highest threshold possible. Perhaps the representative, through the use of interpretation, can convince the auditor to examine all documents, which have a higher value than $1,000. The less documents that have to be produced is limiting your exposure and preventing you from being audited any further.
Since an auditor can go back and request prior years tax returns and documentation, it is important to produce the documents requested, and only those listed, in a timely and organized fashion. The representative should appear professional and well organized. The more timely you are in your replies and the more organized you present it, the more likely the auditor will assume that your business is handled professionally and with scrutiny.
If you choose to handle the audit without a representative, there are some tips to consider. Never leave your original documents with the IRS, never give the IRS agent more or less information than what is requested, be organized, respond timely, answer questions honestly but briefly, do not argue or be belligerent, insist on getting copies of information in their files and of anything you sign. If you have a representative accessible, have them review any documents prior to signing them. Having a representative is up to you, but being informed either way is essential.
Subscribe to:
Posts (Atom)
