When a tax audit or examination notice arrives and informs you that your tax return has been chosen for examination, the news can immediately bring on anxiety and fear. You need legal help now if you are undergoing an audit! There are many reasons a return is selected for examination.
The following is a list of reasons for the most typical IRS Audits:
- A basic tax audit is generally randomly selected. This kind of audit can be quite difficult for the average taxpayer to work with since the IRS revenue agent will inspect every aspect of the tax return and require substantiation of each item on the return.
- Another type of tax audit directly examines your return for specific expenses. This form of audit is conducted if the IRS thinks you may be writing off expenses that are not allowable as write offs. These could be expenses related to travel, business, or other items. If this is the case, the IRS revenue agent will examine your documentation extensively in regards to the specific items in question.
- The IRS might think you are not claiming all of your income. During this type of audit, the IRS is looking for proof that the taxpayer has not declared their full income. The investigation begins when various tax reporting sources have reported higher earnings than were reported by the taxpayer.
- Another type of exam occurs when the tax payer fails to file a return. If a business or person does not file necessary returns, the IRS will file returns for them. The IRS calls this an SFR or Substitute for Return. At this point, the IRS sends out a Notice of Deficiency. If the taxpayer does not protest this Notice, the end result will be a tax assessment. As you can imagine, if the IRS prepares the forms, it is not in the taxpayers favor. Your income could be overstated and any business or personal expenses would not be included.
If your return is chosen for audit or examination or you receive a notice from the IRS informing you of a tax assessment, you need a tax attorney NOW!
You will have to comply with many strict timelines and guidelines concerning an IRS tax audit. All of your documentation must be collected and prepared in a manner that is easily understood. The entire IRS audit process can be a nightmare and no fun at all. However, if you obtain competent legal representation, your chances of owing less or no money to the IRS at the end of the audit process will be much better than if you had tried to do handle it yourself.
If you miss the time deadlines and the tax is assessed, you owe it and the IRS will take steps to collect. If this occurs, often your best option is an Audit Reconsideration. This is a proceeding to get the IRS to take another look at the taxes that were assessed and reconsider whether you owe them. Martelle Law takes pride in our successful track record of representing our clients all over the United States. We vigorously represent our clients and do our best to solve their tax problems.
Is an Audit about the most awful thing that can happen to a person?
When that dreaded notice comes informing you that your return has been selected for Examination, it can make you weak in the knees. There are several types of Audit or Examination. Some of the more common ones are as follows:
A general randomly selected Audit. These are very difficult, because the IRS Revenue Agent will look at all aspects of the return that was selected for Examination.
Examination of a particular expenses on your return. The IRS may believe that you are claiming expenses that you are not entitled to, such as travel expenses, business expenses or other items. If so, they will look extensively at the documentation regarding the items in question.
The Internal Revenue Service also might believe that you are not declaring all of your income. Often the amount that was reported as being paid to a taxpayer to the IRS differs from the amount declared on the tax return. This will trigger an Examination.
Failing to file a return. If a person or business doesn’t file a return, the IRS will file one for them. This is called a Substitute for Return or SFR. They will then send a Notice of Deficiency, which if not protested will result in the tax being assessed. As you can imagine, if it is prepared by the IRS, it usually isn’t in the taxpayers favor. Income might be overstated. Expenses will not be calculated.
If your return has been selected for Examination or you receive a notice that the IRS is going to assess taxes against you, you need legal help NOW! There are strict time deadlines that must be complied with. Documentation must be gathered and organized in a manner that is readily understandable. The Audit process is surely not fun. But if you have competent legal counsel, you will have a much better chance of getting through the process with less money owed to the IRS than without help.
If your time deadlines have passed, you will owe the tax. Then your options to protest the assessment are limited. One way of having the matter reopened and reviewed is to file for Audit Reconsideration.