- Tax Controversy and Litigation
Tax and Estate Planning
- Tax Controversy and Litigation
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Being audited can be one of the worst experiences of a lifetime, and the government has tremendous resources to use against taxpayers. A tax audit could result for any number of reasons, but can be far routine. Whether the audit involves the IRS, FTB, BOE, or EDD, McLaughlin Legal can help.
So, What is an Audit?
An audit is a review or examination of your accounts and financial information to ensure that information is being correctly and accurately reported on your tax return(s). Most taxpayers understand IRS audits as a review of their individual income tax returns (Forms 1040), but IRS audits can include a review and examination of any number of filings, including Forms 1120, 1120S, 941, and more.
Why am I Being Audited?
An individual or organization could be audited for any number of reasons, and sometimes a tax return can be audited that contains no errors. There are, however, some more common reasons that your tax return could have been selected for audit, including:
1. Computer Selection2. Document Matching3. Related Audits4. Informant
Are There Different Audit Methods?
Yes. There are many different types of audits, and not all require an in-person interview. Some of the more common types of audit methods include:
Field AuditsCorrespondence AuditOffice AuditResearchCriminal
What Can/Should I do During an IRS Audit?
If you find yourself in an audit, there are some things you can and should do. Here is an example of some things you may consider when facing an IRS audit:
1. Be Prepared2. Keep Complete Records of Documents Received and Submitted to the Government3. Get Contact Information for the Examining Agent and their Group Manager4. Be Cooperative and Forthright5. Establish a Dialogue on Expectations6. Anticipate Issues Early7. Get Copies of IRS Document
What Should I NOT Do in an IRS Audit?
Just as there are things you can and should do during an audit, there are many things you should never do in an IRS audit. For example:
1. Lie or Submit False Documents2. Be Brash, Unprofessional, or Uncooperative3. Do the Government's Work for Them4. Make Idle Remarks5. Miss an Opportunity to Know What the Agent is Doing, Should be doing, and Why6. Give the Government Original Documents
Never lie or submit false documents during an IRS audit. Lying or providing false documents to an IRS auditor can be devastating and possibly constitute criminal conduct. An IRS agent is not necessarily hunting for fraud and criminal conduct, but lying or submitting false documents will invariably lead to a fraud referral. Even if the IRS chooses not to pursue a criminal case, such conduct could lead to a civil fraud penalty or other stigma that cannot easily be shaken
The IRS is comprise of competent professionals. Although an IRS audit is an adversarial process, professional courtesy should not be abandoned. After all, it is a people management game at some level.
The IRS has the burden on many items and needs to conduct the audit. You prepared the tax return and filed it, and yes, you are responsible for substantiating may of the items on the return. But the IRS is responsible for additional items and you should not have to do their job.
Volunteering information or answering questions not asked can lead to big problems. Off-handed remarks that are not in response to a direct question, and which have not been thoroughly though through frequently expand an IRS audit and lead to further adjustments. The auditor learns something every time you open your mouth. Comments, no matter how benign you might think they are, can prompt the IRS to look into new issues they did not previously consider. If asked, answer truthfully, but briefly. But don’t make casual comments regarding your returns or your financial dealings.
You are not a pushover and you should not feel powerless against in an IRS audit. You have the right and should exercise it, to understand what, if, and why the IRS is doing something. If you don’t understand what is going on or where the auditor is finding support for their determination, ask. This will provide you with an insight to have a discussion as to whether they were right
Never give the IRS original documents in an IRS audit! The IRS will request information and documents from you. It is perfectly acceptable to make copies of documents and provide them in lieu of originals. Once original documents are turned over to the IRS, it can be difficult or impossible to get them back. If needed for future use, you could find yourself in a precarious position if you no longer have possession of original documents needed to prove your case.
What Happens at the End of My Audit?
At some point, an audit will be concluded. Generally there are 3 ways that an audit can end:
- No change – the IRS or other tax agency reviewed your return and is making no changes as filed.
- Agreed – you and the IRS (or other tax agency) are in agreement as to how the return should be adjusted.
- Disagreed – the government has proposed changes to your return that you do not agree with for any number of reasons.
If the audit is closed as a “no change,” there is not much more for a taxpayer to do. If the case is closed out as “agreed,” or even “disagreed,” with a tax liability due and owing, a taxpayer need to consider collection issues if they cannot afford to pay the balance (e.g., an offer in compromise or installment agreement). But before collection issues are addressed, a “disagreed” audit can be appealed or litigated in the U.S. Tax Court before the amount is finally determined.
Why McLaughlin Legal?
The tax attorneys at McLaughlin Legal are qualified and experienced in all types of tax law matters, especially audits. Our firm is not all things to all clients, nor are we a billboard, bus-stop, or “late night TV ad” type firm. McLaughlin Legal is a specialized law firm that defends taxpayers and resolves all types of civil and criminal tax disputes. Whether defending your rights during an IRS audit, before the U.S. Tax Court, or helping you resolve a tax bill you cannot afford to pay, McLaughlin Legal can help.
We strive to provide each client with good judgment, personalized legal services, and great results by relying on our three key principals:
1. Personalized2. Specialized3. Committed
Interested in Learning More?
If you are being audited and interested in learning more about how McLaughlin Legal can help, please feel free to contact us today for a free consultation.