IRS Audit Representation
The IRS wields a significant amount of power to inspect the books and records of taxpayers to determine and assess tax liabilities. Moreover, the IRS auditor represents the government, and it is their job to propose additional assessments of tax and potentially penalties, including the fraud penalty. Consequently, no matter how friendly they appear to be, the auditor is neither neutral nor in your corner. As a result, that’s why hiring an IRS audit attorney is important to achieving a successful resolution of the audit.
Types of IRS Audits
Typically an audit begins when a taxpayer receives a notice from the IRS that they have been selected for an audit. There are different types of audits, including: correspondence audits, office audits, and field audits. In a field audit, the auditor will typically send an information document request to the taxpayer. These document request forms can be exhaustive and can request, among other things, the following items:
- The general ledger.
- Banks statements.
- Receipts and invoices to substantiate deductions.
Why was my tax return selected for an IRS audit?
Selection for an audit does not always suggest there’s a problem with the tax return. The IRS uses several different methods in determining whether to select a tax return for an audit:
- Random selection and computer screening – sometimes returns are selected based solely on a statistical formula, which is known as the DIF score. The IRS will compare your tax return against “norms” for similar returns. As a result, the IRS develops these “norms” from audits of a statistically valid random sample of returns, as part of the National Research Program the IRS conducts.
- Related examinations – The IRS may select your returns when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit.
Next, an experienced auditor reviews the tax return. They may accept it; However, if the auditor notes something questionable, they will identify the items noted and seek additional documentation.
IRS Audit Examination of Books and Records
The IRS auditor will request documentation from the taxpayer in form of an Information Document Request (or IDR). Also, the IDR will request substantiation for deductions claimed on the return and substantiation for amount of income that the taxpayer received during the year. In addition, the IRS auditor may also request a meeting with the taxpayer to discuss the returns, the substantiation provided, or any questions.
Will I need to meet the IRS auditor during my IRS audit?
Sometimes the IRS auditor will request a meeting with the taxpayer or with third parties. An IRS auditor does have the right to request a meeting in person to discuss the audit. In addition, the IRS auditor may request a tour of the business or home of the taxpayer. However, while a tour is within the rights of the auditor, the auditor cannot rifle through the belongings of the taxpayer. If the taxpayer does not agree to meet, the auditor may issue a summons. A summons is a legal document, but it is not self-executing. A summons must be enforced by the District Court in order to be legally binding. In addition, if an auditor initiates third party contacts, the taxpayer must be given notice.
Contact an IRS Audit Attorney
How you respond to and approach the audit can have significant ramifications. If you are dealing with an audit, contact a tax attorney for a free consultation. Consequently, an experienced IRS audit attorney will fight for you to obtain the best results. We have the experience to successfully guide you through the audit process.