Receiving a letter from the Internal Revenue Service (IRS) advising of an upcoming audit is a frightening experience. Most taxpayers do everything in their power to remain compliant with tax laws while simultaneously trying to limit how much they pay.
Sometimes, all it takes is a small mistake or oversight on a federal income tax document to put a taxpayer at risk of an audit. Some people get selected for audits on a random basis. Others attract scrutiny with unusual inclusions in their income tax paperwork or discrepancies between what they report versus what employers or financial institutions report.
An income tax audit can lead to a determination of a major tax deficiency and an obligation to repay any past-due amounts. In cases where the IRS determines that someone intentionally committed fraud, an audit might lead to the IRS referring the case out for prosecution. Taxpayers often want to respond proactively when facing an IRS audit. Most audits fall neatly into one of two categories.
Audits by mail
In scenarios where issues seem to stem from minor mathematical mistakes or omissions, an audit by mail might be an option. In an audit by mail scenario, the taxpayer typically has to provide specific financial records to the IRS. Assistance when preparing for an audit by mail is crucial. Perhaps tax authorities cited an irrelevant section of code. Maybe certain types of evidence can lay to rest the claim that they inaccurately reported their income. Someone familiar with tax statutes can help taxpayers put together a response letter and gather the necessary evidence.
Audit interviews
The form of audit most people picture is an in-person audit or an interview-based audit. The taxpayer may have to discuss issues with their tax return in detail, which makes proper advocacy crucial. In-person IRS interviews can occur at an IRS field office in some cases. When the party facing the audit is a business or a business owner, the audit may take place at the premises of the company.
Regardless of which type of audit a taxpayer faces, they need someone to educate them about their rights and advocate on their behalf during discussions with the IRS. An attorney can spot discrepancies in the IRS’s case and can help negotiate the most favorable outcome given the circumstances. Taxpayers who have received an audit notice need to take steps to protect themselves as soon as possible. Securing legal advice before an audit and guidance during an audit can potentially lead to a more favorable outcome for the affected taxpayer.
