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Audit Services

Finding out that you need audit services is enough to make anyone break out in a cold sweat. After all, the IRS is really checking your return to verify that you’ve properly reported your income. Of 196 million tax returns received by the IRS in 2017, one million of them were audited. That’s 0.5 percent of the returns filed. These audits resulted in more than $6 billion in additional revenue to the IRS.

Audit Selection Process

If the IRS selects your return for an audit, that doesn’t mean that they noticed a problem with your return. The selection process is somewhat random. Many taxpayers seek audit services after the IRS’s electronic formula selects their return for audit. The system digitally compares returns to other similar returns to determine the standard.

The IRS explains further saying, “We develop these “norms” from audits of a statistically valid random sample of returns, as part of the National Research Program the IRS conducts.” They use this program to update the information, which they then refer to in the selection process.

Taxpayers who file returns with information that correlates with dubious returns may also find themselves needing audit services. For example, you may be their next target if an audit uncovers the fraudulent actions of your business partner.

An IRS agent reviews your return if the system singles it out for an audit. If he or she agrees with the digital assessment, the return then goes to the proper department. This is when the IRS begins the audit proceedings on their end. Soon, the taxpayer learns of the impending audit and audit services should be secured immediately.

First Phase of an Audit

The IRS notifies the taxpayer of the audit by sending a notice in the mail. The process begins with an interview. The agent may conduct it via written correspondence or in-person. If they require an in-person interview, the taxpayer may go to the office of the IRS.

If the taxpayer has hired a tax professional for audit services, the tax professional may accompany him or her to the interview.

The auditor may also meet with the taxpayer at his home, work, or the offices of the tax professional providing audit services. The IRS lays out specific instructions regarding how to proceed in the initial audit notice.

You have the right to obtain audit services from a tax adviser at any time during this procedure.

The IRS commonly requests receipts, bills, canceled checks, legal papers, loan agreements, logs and diaries, and tickets. They also request medical and dental records, theft or loss documents, and your schedule K-1.

Legal papers may consist of divorce settlements with any pertinent custody agreements, property acquisition papers and more. Logs or diaries that illustrate dates and locations of your travel or job-hunting expenses may also be of interest to the auditor.

They may also request tickets for plane travel or lottery tickets to show proof of profit or loss. This doesn’t include entertainment tickets, such as those for movies or concerts.

Employment documents that inform the IRS of dress code and continuing education requirements are often helpful in an audit. Questionnaires are a common part of the audit process, as well. Audit services provided by your tax adviser should include help and/or guidance in the collection of these documents.

Final Phase of the Audit

Once the questionnaires are complete, you or your representative should send them to the IRS with the collected documents. This is when the auditor will examine your case and make a determination.

He or she may certainly decide that you’ve successfully proven all the claims on your return. As a result, the auditor will make no change to the tax return and you don’t need to take any further action.

The IRS may propose changes that make sense to you. Consequently, the taxpayer is liable for the additional tax assessed.

If the revenue agent makes changes that you understand, but don’t agree with, you have a few options. You and your adviser may discuss this in a conference with an IRS manager or request an audit reconsideration.

Your tax advisor is likely to include this conference with the original audit services he or she agreed to. If you’re not sure, review your contract.

Audit Reconsideration

First, let’s discuss who can request an audit reconsideration. They will allow one if you locate new documents that pertain to the audit. This also applies if one or more of the following pertains to you:

  • You disagree with the new tax that results from the audit.
  • You didn’t participate in the audit.
  • The IRS report on your audit wasn't received.

Certain circumstances make a taxpayer ineligible for an audit reconsideration. There may still be some recourse, however, so discuss your reasoning with your tax adviser for further action.

For example, if you’ve already paid the entire tax debt assessed, an audit reconsideration isn’t the proper avenue to pursue a refund. In this case, an amended return must be filed instead. Additionally, if a federal tax court has ruled that you owe the tax, an audit reconsideration will not be accepted.

Your Rights During an Audit

As a taxpayer under audit, you have rights that must be afforded to you by the auditor. The IRS acknowledges that you have a right to:

  • Professional and courteous treatment by IRS employees.
  • A right to privacy and confidentiality about tax matters.
  • Know why the IRS is asking for information, how the IRS will use it and what will happen if the requested information is not provided.
  • Representation, by oneself or an authorized representative.
  • Appeal disagreements, both within the IRS and before the courts.

These are in addition to the IRS’s bill of rights in Publication 1. They include a right to:

  • Be informed
  • Quality service
  • Pay no more than the correct amount of tax
  • Challenge the IRS’s position and be heard
  • Appeal an IRS decision in an independent forum
  • Finality
  • Privacy
  • Confidentiality
  • Retain representation
  • A fair and just tax system

Hiring Representation for Audit Services

While the IRS allows you to represent yourself in an audit, consider hiring a tax adviser. A tax adviser speaks the same language as the IRS. For this reason, they will commonly take over all contact between the taxpayer and the IRS. This removes the chance for unwitting statements that may be misunderstood by the agent. Furthermore, these statements are often used against the taxpayer. A tax adviser can also identify which portion of the tax return has caught the IRS’s attention. As a result, the taxpayer can gather the crucial documents needed to prove the claims on the return.

Additionally, your tax adviser will handle required questionnaires and other documents that must be completed. If needed, he or she should be prepared to defend you in the audit and file an appeal. Finally, your debt should be negotiated to reflect the least amount you’re required to pay by law.

Audit Services at Tax Champions

Tax Champions has been helping taxpayers who are being audited for over 35 years. If you’ve received an audit notice from the IRS, call us today. We’ll promptly take action by responding to the IRS on your behalf and constructing responses to requested questionnaires. At the completion of the audit, we’ll take the proper action to respond to the results, if needed.

At the conclusion of the audit, we’ll help you address the tax debt that results. If you don’t have the means to pay it in full, we’ll establish a resolution. This may be a payment agreement or another arrangement that will keep you out of trouble with the IRS. Our goal is to relieve the stress of an audit while giving you peace of mind. So, we'll work hard to achieve the best results that you qualify for.

The First Step After Receiving an Audit Notice

Contact Tax Champions as soon as possible. You can reach us by calling toll-free at 800.518.8964 or use the blue box on the right side of this page. Once you submit your contact information to us, we’ll reach out to you. Another available option for reaching us is to use the chat box in the lower right-hand side of this page. We strive to make communication as easy on our clients as possible, so we offer several contact methods.

We’ll discuss your case in detail and explain your options in a free case review over the phone. There’s no obligation to hire our firm, and you’ll learn your options. At the end of the review, you'll have a better idea of what the resolution of your case will look like.

You have nothing to lose. Call us today and sleep better tonight.

Sources

[1] Audit Reconsiderations. (2018, March 21). Retrieved from //taxpayeradvocate.irs.gov/get-help/audit-reconsiderations

[2] Audits Records Request | Internal Revenue Service. (2019, April 29). Retrieved from //www.irs.gov/businesses/small-businesses-self-employed/audits-records-request

[3] Enforcement Examinations | Internal Revenue Service. (2019, May 17). Retrieved from //www.irs.gov/statistics/enforcement-examinations

[4] About Publication 1 | Internal Revenue Service. (2019, April 3). Retrieved from //www.irs.gov/forms-pubs/about-publication-1

[5] IRS Audits. (2019, February 12). Retrieved from //www.irs.gov/businesses/small-businesses-self-employed/irs-audits

 

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Walter Wotman, CPA

Founder & Managing Partner

Walter Wotman's Tax Champions authored this helpful Guide to IRS Tax Resolution for American taxpayers. He is one of America's most experienced tax negotiators with over 35 years of experience helping thousands of clients settle difficult back tax issues.

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