IRS audits are rare. However, they are still one of the most dreadful situations faced by a taxpayer. Now, for many, navigating through the IRS audits is simple. This is because the audits are conducted through mail and are less intrusive. The type of audit that has the taxpayers worried is the one where they have to meet with the IRS officials at either their home or the IRS’ office.
Most of the audits just change the tax return. In the case of mail audits, the average additional amount the taxpayer owes is $6,790. However, for face-to-face audits, this number is much higher, $77,309. No matter the type of audit you are going through, it is suggested that you take the help of professionals.
For the people who have to deal with IRS audits, here are the top 10 factors that you must know about.
Never ignore the audit
Ignoring IRS audits won’t just take them away. Instead, the IRS will assess additional tax on the areas they will be auditing on the tax return. In the case of face-to-face audits, the IRS will be asking third parties for information like the bank statement. If you have a small business, the IRS will contact the vendor providing you with the materials for the business. In any situation, if the IRS is asking around and requesting information from third-parties, it means they are trying to determine whether you have been hiding income or not.
Don’t lie during the audit
Never lie to the IRS officials. It is a crime to lie to a federal agent. When you are audited, you have to present all the facts to the agency and the tax return position. If you think that you cannot be entirely honest with the IRS, it is time to bring in the big guns, a professional tax resolution service.
You have the right to appeal
Just because the IRS auditor has said something, you don’t have to absolutely comply with it. If you disagree with the application of the law or any facts, you have the right to appeal. You can appeal this determination to the Office of Appeals of the IRS. Once the audit has concluded, you can present your case to the Appeals office, an independent person after a few months. This way you can get a second opinion.
You have to file all the returns
If you are under audit, it is best to ensure that you have filed all the required returns. You won’t have a good start with the auditor if you are behind on filing the required returns. At the very least, the IRS will be reviewing 6 years of filing history. If you fail to do this, the IRS auditor will be filing a substitute return for you. This will not include any credits, deductions, or dependents.
Be prepared for the audit
If you are not prepared for the auditor, you will be facing skepticism from the auditor and long IRS audits. In the case of the field and office audits, you can take help from a tax resolution service to do a mock audit. If you are unable to advocate for your return position, the auditor will bring in more questions. He/she will also request for more information. In some cases, if the auditor is suspicious, the audit can expand into other years.
Bring in the issues to the auditor’s manager
If you are unsatisfied with the way the audit is progressing, you can always speak to the manager of the auditor. In fact, at the beginning of the audit, get the contact information of the auditor and their manager. The manager is the first line of appeal if you are disagreeing with the auditor. For example, if you disagree with the IRS audit penalties, you can ask the manager to intervene.
Get it all in writing
It is very important that you have all the requests for information in writing. If you don’t have a clear trail of IRS audits, the auditors can get confused regarding the facts of the case. It will also make this a long audit. Take the lead, demand that the requests are in writing, and reply in writing. This will help in eliminating all confusion and focusing on the issues in hand. Also, if you are appealing the case’s findings and IRS audit penalties, these written records will be useful.
Obey the deadlines
IRS Audits can have several deadlines. This includes the audit appointment, deadlines for providing information, for responding to the initial audit report, petitioning the IRS appeals, petitioning the tax court, etc. If you miss early deadlines during the audit, you are putting auditors in a tight place. It is fine if you delay one or two meetings for a reasonable cause. However, if you miss several deadlines and provide incomplete information, the auditor will propose adjustments to the tax based on the fact that you didn’t meet the burden of proof.
Contest IRS audit penalties
More than often, taxpayers blindly accept the penalties imposed upon them. IRS auditors have a history of assessing penalties arbitrarily. It is your responsibility to examine the facts and argue the IRS audit penalties that are not applicable. You have to prepare to explain the circumstances to the IRS and prove to them that you made a reasonable attempt for complying with the law. However, because of unforeseen circumstances, you were unable to do so. For example, if you used a tax professional for filing your return, you can make the case highlighting your reliance on the advice of the professional. In any case, you can’t just concede. If you need a second or third opinion, you can contact the auditor’s manager and the Office of Appeals of the IRS.
When unsure, contact the professionals
During a face-to-face audit, you will have to speak with the IRS in their language. For this, it is best to hire professionals who can navigate the audit, advocate your tax return position and have knowledge of the rights you have as a taxpayer. Unless you have the experience of handling an audit, you have to contact a tax resolution service.
Platinum Tax Defenders is one such tax resolution service that has been helping taxpayers since 2011. We hire top tax relief experts to ensure that our clients get the best service. We can help guide you through the whole IRS audits so that you come out of it unscathed and avoid any IRS audit penalties. For a free consultation, book a free consultation with the Platinum Tax Defenders today!