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March 9th, 2010
If you take a deep breath and read it slow, the audit letter you just received from the IRS will list the items the IRS wants to audit. A tax audit begins with gathering together all of the documentation the IRS wants to examine. Once this is gathered together, you will send it to us, where we will double-check every item, make sure there is nothing incriminating, and we will put it into the format required by the IRS. Then we will submit your documents with our cover letter to the IRS auditor on your case. We generally encourage our clients to send us not only the documents requested in the audit letter but ALL documents to support the entire return and its deductions on Schedules A and C. Why? Because auditors work by statistics. For example, if the documents you provide do not satisfy the auditor, he or she will often come back with additional questions about the entire return. I like to be prepared for that eventuality ahead of time, so I don’t get blindsided and so I can best represent you. This means having all of your return documentation at my fingertips.
Here’s a Golden Rule of Audits: Never EVER give the auditor your original documents. Send us copies, not originals. The reason is obvious: things get lost in the mail and things get lost by the government.
At the close of the face to face audit the auditor will issue an examination report. This is his or her suggestions about what should happen with your return. Note that his report is just that, a report, and that it is not the final authority on your tax return. The audit report must be approved by management and then it takes effect. In the meantime you will have the right to appeal and the additional right to duke it out in Tax Court. Prior to filing with IRS appeals, you can negotiate adjustments by contacting the auditor and the auditor’s group manager. Often you can agree to compromise on a reasonable settlement amount.
Posted in IRS Audit Representation, IRS Tax Audits | No Comments »
July 25th, 2009
A business tax audit is different from a personal tax audit in several important ways. Here is how we handle some of these business audit differences at IRS-SOLV:
- We never let our client attend the audit interview. We prefer to do that…alone.
- We ask our clients to allow us to speak to the IRS auditor, instead of the client speaking with the auditor. This preserves the integrity of the defense, keeping unsaid the things that should never be said to an IRS auditor
- Shareholder derivative suits are suits brought by shareholders against the officers and/or directors of a corporation. We guard against shareholder derivative suits. The cause of action for this kind of suit is grounded on an alleged breach of fiduciary duty. Because these kinds of suits are becoming increasingly common and they grow more risky, it would be wise to secure expert and competent lawyers such as our firm to handle your defense
- Sometimes an angry ex-spouse or business partner snitches on a taxpayer. The information given may be false or it may be the truth. When this happens we go out and immediately obtain their statement so that we can contradict where the truth requires it.
- A juicy tax audit subject is the use of tax shelter investment losses. We help in the defense of such a claimed loss by the taxpayer. You have complex investment or business expenses on your tax return. We are highly experienced in the area of transaction law and its tax effects
- Oftentimes a business will have have large amounts of itemized deductions on its tax return that are outside IRS audit parameters. We can insulate these in advance–anything less will automatically trigger an audit.
- Cash receipt business people are in a high risk category for audits. Lawyers and doctors and waiters beware.
- Business expenses high in relation to business income? It happens. We help insulate against this audit trigger by generating substantiating documentation.
- Rental expenses on your tax return are a huge audit trigger, yet most often these are legitimate. We can help you prove your expenditures in the course of the audit by several means we use.
- You have complex tax transactions without explanations on your tax return. We will reverse-audit these items and prove them to the auditor
- Beware the auditor who thinks he or she needs to come to your place of business and talk to your customers or clients. Call us without delay and we’ll prevent this from happening.
- Similarly, an IRS auditor wants to come to your home and you don’t want them there-call us without delay and we’ll step in.
These are just some of the ways we can help in the area of business or commercial audits. Call us when you get the notice and we’ll help you get the jump on the case that you will find is necessary.
Posted in Business Audits, IRS Audit Representation | 2 Comments »
July 10th, 2009
One great benefit to using an experienced tax attorney for your IRS audit is where there is the possibility of a tax fraud investigation. Your experienced tax attorney will usually be alerted when the activities of the tax auditor (IRS) suggest the audit is becoming more the nature of a fraud investigation than a garden variety tax audit. You should only use an attorney fully versed in tax fraud matters at this point. CPAs and Enrolled Agents do not have the tools or licensure to represent you in the U.S. District Court where tax fraud cases oftentimes are based. If your Revenue Officer (examiner) suddenly disappears and is out of the picture for a long period of time, this indicates the possible referral of a case to the Criminal Investigation Division of the IRS. Why would this be? Because the IRS examiner is required to suspend all audit activity once the suspicion of fraud exists and the case is referred to the CID. Has this happened in your tax audit? Please contact John Ellsworth and discuss the possibility of a tax fraud defense without further delay.
Posted in Tax Fraud | 2 Comments »
June 18th, 2009
If you are looking to avoid tax audit procedures from the IRS, there are several steps that you can take to safeguard yourself and your financial assets. The best avoidance tactic that you can use is to include any information with your original tax return that may raise an IRS red flag. If you have made complicated tax transactions, include all of the pertinent information and explanations in your return.
By utilizing careful tax preparation measures you can protect yourself from an audit. Have your taxes prepared by a professional that has a good reputation. If you have any questions are concerns about your tax return do not hesitate to ask them. A tax attorney can also overlook your business and personal finances and point out any potential problems that they may notice. If you are looking for peace of mind, enlist the services of a tax attorney to look over your financial paperwork and to determine if there any red flags standing out. This is a great way to avoid tax audit procedures.
Organization and documentation are other ways that you can avoid tax audit problems. By keeping your tax documents organized and attaching any documents that the government might call into question ahead of time you will be cutting them off at the pass. If you have any expenses that might appear as questionable to an IRS processor just include the documentation in your return. If you are eligible for deductions you have every right to claim them and you can avoid having to deal with the stress of an audit.
If you happen to be self-employed, you will also be at high risk for an audit. The IRS maintains that people that are self-employed are most likely to under-report their taxable income and to abuse tax deductions which is why these individuals are targeted by IRS auditors much more frequently than other types of wage earners.
The IRS computers do randomly select tax payers for audits. Regardless of your income bracket and the deductions that you take, if you are selected by the computer, you will be audited. Your best defense is to be prepared. Keep all of your previous returns in order until they have reached the statute of limitations. While there is no magic way to guard yourself against an audit, you can prepare yourself by maintaining organized and comprehensive financial records and receipts.
Tags: avoid tax audit, irs audit guidelines, irs audit trigger
Posted in Tax Audit Protection | No Comments »
June 15th, 2009
The worst thing that you can do after your receive a tax return audit is to ignore the problem or to procrastinate in facing the predicament that you are in. Once you receive that notice from the IRS, you need to be proactive in defending yourself. Time is of the essence when it comes to establishing your defense. The more prepared that you are, the more successful that you will be. The audit notification will inform you of which type of audit that you will be undergoing and you need to prepare yourself accordingly.
The first and most common type of tax return audit is a correspondence audit. These audits typically require you to provide some type of documentation to back up a claim or to support a deduction that you have made. Once you successfully provide this information to the IRS they will give you notice that the audit was completed and that is the end of it. If you can not produce the requested information they will figure out what taxes that you owe them and they will send you a bill. The best defense in this type of audit comes from organization and preparation. Save all of your receipts and documentation. Keep them somewhere safe and in order so that you can access them should the need arise.
The next type of tax return audit and perhaps the most intimidating type is the office audit. You will be given a time and date that you must arrive at an IRS location and supply requested information and answer questions from IRS agents. While it is entirely acceptable to ask the IRS for more time in tracking down information and compiling their requested items, by demonstrating to them that you are organized and that your finances are orderly you will be sending them the message that your taxes are also done meticulously. These types of audits can be extremely stressful. If you receive an office audit you would be best advised to hire a professional tax attorney to appear at the audit on your behalf.
And finally, there is the field audit, in which an IRS agent will come out to your home or business in order to ask you questions and verify documentation. This type of audit is not as common anymore but once again it would be in your best interest to seek representation from an attorney under this specific circumstance.
Tags: reverse audit, Tax Audit Protection, tax return audit
Posted in IRS Tax Audits | 1 Comment »
June 12th, 2009
There are a number of things that you can do on your tax return that will end up serving as red flags to the IRS. Fortunately, there are a number of ways that you can avoid the IRS audit flags. The IRS actually uses a computer program to compare your return against the National Discriminate Information Function system average. The more that your point total deviates from the average, the more likely that it will serve as an audit red flag.
One of the largest IRS audit flags is when you claim high amounts of itemized tax deductions. The IRS establishes certain parameters for itemized deductions and when your claims exceed these parameters you are much more likely to be audited. By enlisting professional help you can avoid raising some of these red flags. But, if you are eligible for a deduction you should not hesitate in claiming it, just be certain that your taxes are filed correctly and that you have the proper documentation for each and every deduction that you make. A competent tax attorney can guide you through this process.
There are also many other red flags that draw the unwanted attention of the IRS when they are processing your tax return. If you have been audited in the past and the audit found that you owed back taxes, the government will be processing your returns much more carefully. One of the biggest IRS audit flags is when you claim tax shelter investment losses on your return. Also, be prepared for an audit if you own a business or work in a business that commonly receives cash in the regular course of business, such as doctors and lawyers. And if you have any types of expenses that are high in relation to your income be ready to defend your deductions and claims. There are a number of circumstances that may cause the IRS to audit you.
Finally, many times people become the subject of an audit because of a past disgruntled business partner or an ex-spouse. These people may contact the IRS and disclose some of your personal financial dealings in order to get retribution for some perceived offense. That’s why it is always important to file your taxes honestly and morally. You never know when someone that you trust may turn against you and use any information that you told them in confidence as a way to get revenge.
Tags: avoid tax audit, irs audit flags, tax return audit
Posted in Tax Audit Appeals | No Comments »
June 9th, 2009
After you receive your final tax audit report from the IRS you will either end up owing them nothing, or you will have to pay them a specified amount of money in back taxes. If you have satisfied the IRS and their inquiries by backing up your tax return they will simply consider it case closed and nothing will come of it. If the IRS determines that you owe them back taxes, there are several options that you have. If this is the case you should consider contacting a tax attorney to take over the negotiations with the IRS.
Your tax attorney will review the amount that the tax audit report claims that you owe and they can determine whether or not it is accurate. Then they will deal directly with the IRS to arrive at a figure that is more realistic. Then, they will work out a monthly repayment plan with the IRS if you are unable to pay the entire amount off at once. If you end up owing the IRS a substantial amount of money that you believe that you will not be able to repay, your attorney can draw up an offer in compromise plan. This offer will be for one lump sum payment to satisfy the debt at a reduced rate. The government has the option to determine whether or not they will accept the offer. If they do choose to accept it, your debt will be considered satisfied and the case is closed.
After the tax audit report is completed, it is also possible that an IRS agent may turn your case over to the Criminal Investigation Division of the IRS. This occurs when the auditing agent suspects that a crime has been committed while he or she is in the process of completing your IRS tax audit. For the most part, these auditors only want to collect the back taxes that are owed, but if you make a mistake during an interview with an IRS agent and you offer up incriminating evidence against yourself, the agents are obligated to determine if there was criminal intent. Remember, most IRS tax audits and most criminal investigations never end up going anywhere unless you say something you shouldn’t have said that was self-incriminating or if you turn over records that were incriminating. If you suspect that you may have made negligent errors or erroneous claims on your tax return, hire a tax attorney immediately to save you from incriminating yourself.
Tags: irs audit flags, tax audit lawyer, tax audit report
Posted in Tax Audit Protection | No Comments »
June 6th, 2009
When you need a tax audit lawyer, it is important to select one with the knowledge and the experience. A knowledgeable tax attorney will be able to figure out exactly what you owe the IRS, because the IRS often comes up with a highly inflated figure for the amount that you owe in back taxes. They will also be able to guide you throughout the entire process and make sure that your audit is handled properly. A tax audit lawyer will also have unparalleled experience in dealing head on with the IRS. Experience can only be gained by spending time defending people against audits and becoming familiar with how the IRS works.
Dealing with the IRS is a serious matter. They can drastically garnish your wages and place a levy against your bank account. All too often people wait to hire a tax attorney to defend them against the IRS. They do not contact an attorney until the wage garnishments start. At this point an attorney can still help you in getting an offer in compromise or in establishing a repayment plan, but the sooner that you contact an attorney the better the outcome will be.
You should never use a company to defend you in an IRS audit. They can not offer you all of the services and protection that an attorney can. An attorney is able to provide you with exclusive confidentiality and more protection that any other CPA or company can. Your personal records and information are protected by the attorney client privilege and can not be handed over to the IRS. An attorney can not be bullied by the IRS.
Small business owners can also benefit from the assistance of a tax attorney. An attorney can protect your business and help you to sort out your tax dilemmas so that you don’t have to lose your business. Many small business owners do not even realize the errors that they made on a tax return, an attorney will work with you and the IRS to come up with a repayment plan to satisfy the debt.
If you want to get through your audit as quickly and cheaply as possible, hire a tax audit lawyer as soon as you receive an audit. They will help you obtain offer in compromise relief and tax settlements. They can also successfully defend you in tax court cases. It is imperative to contact an attorney as soon as possible in order to maximize your chance at reaching a successful outcome from the audit process.
Tags: federal tax audit, irs audit help, tax audit lawyer
Posted in IRS Tax Audits | 1 Comment »
June 5th, 2009
If at any time during the tax audit the taxpayer’s representative feels there may be a fraud investigation involved, or if the activities of the revenue agent suggest that the audit is leading to a fraud investigation, an attorney totally familiar with tax fraud matters should be consulted immediately. Under normal circumstances the revenue agent will not tell the taxpayer’s representative that fraud is suspected or that a fraud investigation is underway. This is something you, the representative, must ferret out for yourself.
The suspicion of fraud may be gleaned from certain ways you see the revenue agent behaving. These behaviors include circling around the taxpayer and contacting third parties for information and/or documents; these would be individuals and institutions such as the taxpayer’s customers or sources of supply. Other actions include a direct inquiry to financial institutions with which the taxpayer deals (especially if the IRS is looking for matters that don’t appear on the tax return but do appear in bank records); large deposits or withdrawals (as in, where did it come from, where did it go?); a request that your client furnish a net worth statement; or the sudden disappearance of the revenue agent with whom you’ve been interfacing. Such a disappearance indicates the possible referral of the case to the Criminal Investigation Division, because the revenue agent must cease all activity on the file while the CID decides whether to accept or reject the referral of the case from the revenue agent. Short form, if your revenue agent disappears for more than a month, contact a tax fraud attorney without delay and tell him or her your set of facts.
Posted in IRS Tax Audits | 1 Comment »
June 5th, 2009
Preparation for the tax audit is everything. Both the representative and the taxpayer have much to do before they ever set foot into the IRS office. The entire tone of the audit will depend on the degree of preparation by the tax audit lawyer. If there is sloppiness or ignorance on the part of the taxpayer’s representative, it will paint a big target on the taxpayer’s back.
Therefore, before the audit, all supporting records and other substantiating documentation should be rounded up, studied, and digested so that they can be organized for quick production to the revenue agent during the audit interview. What about original evidence that is unavailable to support the taxpayer’s position–what is the next best thing? Let’s say checks or purchase invoices have been mislaid or destroyed that would have proven certain purchases, cost of goods sold. In such circumstances the taxpayer and his tax lawyer must make every effort to obtain these same items from the taxpayer’s bank and from the supplier itself. Photocopies of bank statements and of the checks themselves are easily available from the bank. Although as a general rule information and material should never be volunteered during the tax audit interview, the movement of the case and control of its parameters can be held by the taxpayer’s representative if he or she maintains a superior knowledge and understanding of the facts and the documentation that is key to the audit.
Posted in IRS Tax Audits | 1 Comment »
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