When the IRS produces its “Notice of Determination” at the end of an audit, a very important door closes: the ability to put information onto “the record” in order to bolster the odds of a successful appeal. If you are not satisfied with the results of an IRS audit, the next step is to appeal the results in the Notice of Determination. However, there is no opportunity to provide additional information at the appellate level. If it isn’t in the record of the of the audit, you can’t add it in the appeal.
Many individuals and business people think they will win over an IRS auditor by over providing information, and “fully” answering the IRS’ questions. The exact opposite is true. The IRS respects the firm, focused and pointed response that fully understands a taxpayer’s rights and the law. When engaging the IRS, we are consistently holding them to the letter of the law, and reminding them of the limits and protections it contains.
“But if information must be in the record for a successful appeal, isn’t more information a good thing?” No. Providing too much information or the wrong information simply opens up the taxpayer to additional risk and a wider audit. In most cases a taxpayer’s practice in one tax year is a behavior repeated from previous tax years. This opens the door to a broader audit scope into prior year’s returns as well. The information we provide for “the record” is focused upon the specific issue or question of law that lies at the heart of the audit. Our primary mission is to achieve an effective outcome during the audit.
If we are working with a challenging auditor, or if the audit is simply not adhering to US or California law, we must work to ensure that the appropriate basis for an appellate argument is captured in the initial audit. Once the Notice of Determination has been issued, the information door closes. These are some of the reasons why it is so important to have expert and experienced help from a tax attorney with a strong accounting staff during and IRS or California tax audit.
If you have been contacted by the IRS or a California tax agency about an audit, you need to fully understand what is going to happen and seek representation. It is not prudent to communicate with the IRS yourself. Call us at 866-631-3470 for a free consultation, and learn about what to expect in an IRS or California audit, and how to best ensure a successful outcome.