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.

Understanding the Different between an IRS Tax Audit, IRS Lein and Fraud

The Internal Revenue Service has been a powerful government entity for many years in the United States and one that is not usually reckoned. Results are rarely in the favor of the citizen. It is a frightening and stressful time because so many outcomes are possible. From jail time to house seizures, the IRS has very few limits as far as what is allowable by law to punish and collect from offenders.

If you have intentionally defrauded the IRS through false reporting or non-filing, this is handled very seriously. Tax crimes can result in high fines and even prison time. IRS Audits have went down in recent years, due to a computer program that uses an undetermined formula to randomly choose the filings that provide the IRS the largest penalties, which boosts the revenue amount for the IRS. With that said, if you are among the 1 in about 200 people that get audited every year, you may want to be a bit apprehensive. Out of those audited, 1 in 5 get away without a fine or owing anything, but the other 4 in 5 can get severe punishments, jail time and serious collection methods can be levied.

When a taxpayer is found to be deceitful during an IRS audit, the auditor will try to determine if this is intentional. If the taxpayer purposefully defrauded the IRS, it becomes tax fraud. Once this is discovered and the amount of the fine or tax bill is determined, the IRS gives the individual a certain amount of time to pay the bill off. If the person can not afford to pay the bill off or simply fails to do so, the IRS may place a lien on your credit and against you. On a lien, you are usually given 10 years to pay back the total amount owed.

While a lien isn't paid, if the back due amount escalates to a levy, this could mean certain trouble for the taxpayer, though this is a last resort used by the IRS. Once you are levied, you have 45 days to pay the total tax bill. If you still fail to comply then any property you own can be taken. If you are at or near this point, it is strongly recommended that you retain professional help such as a tax attorney and/or a tax advisor for help.

Avoiding the audit all together is ideal, but once you have exhausted the entire IRS audit process including court, it is advisable to pay up, get help or understand that life as you knew it will not be the same.

Should I follow-up with the IRS Auditor if I haven't Heard from them in Months?

If the IRS is auditing you and you haven’t heard from your auditor in months, this may not be a bad thing. Perhaps your auditor was terminated or transferred. Another explanation is that your file could be sitting at the IRS to be processed or the file may simply be in a pile being over looked or even better, misplaced. Either way, this could result in your favor since the IRS auditors do have deadlines.

The IRS auditors have deadlines that must be followed with regards to closing your file. This is usually within 28 months from the date you filed your return or the date that it was due which is always on April 15th. The exception to that is August 15th if you filed for an automatic extension via form 4868. If you filed for a second extension using the form 2668 then October 15th would be your deadline. If extenuating circumstances have taken place on the auditor’s behalf, the IRS legally has an additional 8 months to complete your audit. That additional 8 months is time that the IRS does not want to spend having your case open and investigated, as this time is set aside for the appeals process.

Let me give you an example. If you file your 2006 return on April 15th, 2007, then 28 months from then is August 15th 2008. The eight months remaining isn’t for investigative purposes but rather for appeals processing. If you filed for an extension then the 28 months can begin as of August 15th, making the deadline for the auditor December 15th 2008. The same applies for the second extension and so on.
Calling the IRS may result in your file being found in a timely fashion. On the other hand, leaving it alone may result in the time expiring for the IRS to complete the audit. If that happens, you may be free and clear due to your file being over looked, misplaced or the auditor’s unfortunate termination. Either way, you should always remain calm and patient. Expediting the process will not help you in any way and may even be to your detriment. Do not call, email or contact the IRS in any way. Continue to do business as normal, being sure to accurately file any taxes in subsequent years. Knowing your rights and their deadlines is imperative in this situation.