If you have received a notice from the IRS questioning or disallowing certain deductions, do not ignore it, don’t panic, talk to the auditor only enough to refer him/her to your tax professional, and get organized. Without the appropriate response, the IRS will change your returns and assess a new liability along with additional penalties and interest. Ignoring the notice will also waive your future rights.
You will normally receive a letter stating that your tax return has been selected for an examination. By no means does this imply that you are lying or cheating on your tax return. The goal of the IRS audit process is to increase the tax compliance and collect the appropriate revenue for the government. The moment you receive notice of an examination is the right moment to seek professional IRS representation.
The IRS has “normal” percentages for deductions based on income levels, and the more your deductions vary from the norm computed by the IRS, the greater the chance of error on the return. Therefore, those returns are the ones more likely to be audited. IRS audit rates are rising dramatically for all types of taxpayers. Over the last few years, the rate at which the IRS is auditing individual taxpayers has risen more than 25%, and the audit rate for high-income taxpayers has nearly doubled.
Because the tax laws are subject to interpretation and are neither black or white, there is no such thing as a perfectly correct tax return. IRS audit agents will often try to expand the scope of the audit to include other areas of the tax return, or include other years beyond the tax return in question. Rock & Hammer representatives can conduct the audit in such a manner as to “limit the scope” or limit the amount of information the agent sees or requests to examine.
Always prepare by providing your representative with the information requested by the auditor in an organized and timely manner, it limits the amount of information that is exposed to IRS scrutiny and shows that you are well prepared. Organized records also have a tendency to make the auditor think you are a “squeaky clean” taxpayer and may result in the auditor limiting their scope.
Rock & Hammer has substantial experience representing individuals, professionals, and business owners facing IRS and State audits. You need an experienced representative on your side when facing the IRS to resolve your tax liability.