An IRS audit doesn’t have to be a nightmare of financial and emotional fear. How do most US taxpayers react when they receive an audit letter from the IRS? What are the actions you can take to not only improve the likelihood of the best possible outcome in an IRS audit, but to reduce the stressful impact it will have on your life.
The short answer is this: hire an experienced, proven IRS tax attorney to represent and protect your interests. The cost of your attorney will be far outweighed by the reduced financial impact this audit will have upon not only your finances, but every aspect of your personal and professional life as well. Ask about the protections of the attorney-client privilege that are not available through a CPA or other tax audit professional.
Most Clients are surprised to learn they will never have to communicate with the IRS. In fact, it is not in the best interest of a US taxpayer to speak directly with the IRS examiner during an audit. Your tax attorney becomes your authorized representative for the scope of the audit. Your attorney will manage all communications and answer all questions raised by the IRS representative during the course of the audit.
The IRS revenue officer or agent is a trained interrogator and has developed a strategy to maximize the revenue your audit will generate. Audits most often raise questions about a specific period of time and a focused set of financial issues or questions. It is in our interests to keep the audit as tightly focused as necessary to work through the agent’s questions and provide substantive (and whenever possible exculpatory) information.
Most taxpayers provide far too much information when answering the agent’s questions in an IRS audit. It is natural to take a position that you believe to be “cooperative” or “transparent.” You may believe providing substantive information will establish your goodness and honesty and, in some manner, ingratiate you to the IRS agent.
This is simply not true. The IRS agent will use any and all information you provide to maximize the amount you owe, while attempting to increase the scope of your audit. The agent will look for reasons to expand an IRS audit into prior years or additional financial issues in order to increase the revenue they pull from your bank account.
An IRS audit doesn’t have to be a nightmare. It should be a carefully managed and structured response to answer the IRS’ questions and resolve potential issues.
Your tax attorney should manage all communications with the IRS. This will not only reduce the genuine impact of the audit on your life, but it will also keep the audit focused and limited.
It may also surprise you to learn that most IRS agents are not accountants. In fact, they aren’t even experts in US tax law. Your tax attorney is often required to provide an explanation of the Generally Accepted Accounting Principles (GAAP) that underly the return in question, and how the information originally provided was actually accurate and complete.
Your tax attorney should work to limit the scope of the audit, and help the IRS agent to understand applicable accounting processes and US tax laws with the ultimate goal of significantly reducing or eliminating any amount you will be required to pay.
An IRS audit doesn’t have to be a nightmare. If you have been contacted for an IRS audit it is never in the best interests of a US taxpayer to speak directly with the IRS. We invite you do download our white paper “What To Expect from an IRS Audit,” learn more about the integrated tax, legal, accounting and business consulting services of Allen Barron and contact us or call today to schedule a free consultation at 866-631-3470. Ask about the protections of the attorney-client privilege that are not available through a tax preparer, accountant or CPA.
