An IRS audit can be a stressful and overwhelming experience for many individuals and businesses. The thought of facing the IRS alone can be daunting, especially if you are not familiar with the tax laws and regulations. That is where IRS tax audit representation services come in. These services provide individuals and businesses with professional representation during an audit, helping to ensure that their rights are protected and their best interests are represented.
In this article, we will discuss the benefits of IRS tax audit representation services, how to choose the right representation service, what to expect during an audit, and why having professional representation is crucial to a successful outcome. Whether you are facing an audit or just want to be prepared in case of an audit in the future, this article will provide you with the information you need to make informed decisions about your representation options.
According to the IRS website, "an Internal Revenue Service audit is a review/examination of an organization's or individual's accounts and financial information to ensure information is reported correctly according to the tax laws and to verify the reported amount of tax is correct."
Even though we hear that most IRS audits are selected at random, we can tell you that most of the IRS audits that we have seen are the result of red flags such as unreported income, income that does not match 1099s and W-2s, not reporting a foreign bank account, too many deductions, incomplete income tax return and even for not filing tax returns. The IRS selects taxpayers for audits based on various factors on tax returns, including deductions that are higher than average or income levels that appear unusually low. The IRS also uses a scoring system to select taxpayers for audit purposes. This system assigns points to certain items on your tax return and if the total score is high enough, you may be selected for an audit.
You have certain taxpayers' rights when it comes to being audited. These include the right to be informed of the reason for the audit, the right to receive a copy of your audit file, and the right to appeal any decisions or assessments made by the IRS. You also have the right to professional representation during an audit. This is where Internal Revenue Service audit representation services come in.
IRS audit representation is a service in which a qualified CPA or Tax Attorney stands on behalf of a taxpayer before the IRS, assisting the taxpayers with the compilation of requested documents, correspondence, and IRS meetings, and assisting necessary during the IRS audit. According to the Bill of Rights, taxpayers have the right to retain an authorized representative of their choice to represent them in their dealings with the IRS. The representative of your choice will help you understand the audit process, answer any questions you may have, and ensure that your rights are protected throughout the process. They can also provide advice on how to best approach the audit and strategies for dealing with difficult issues.
Having professional representation during an audit is highly recommended, even if you feel confident in your ability to handle the process. An experienced tax attorney or certified public accountant can help navigate the complexities of the audit and ensure that your best interests are being represented.
Taxpayers have the right to represent themselves during an IRS audit, but many choose to hire a tax professional or attorney to assist them. The following individuals are authorized to represent taxpayers during an IRS Audit:
It is important to note that not all tax professionals are authorized to represent taxpayers in front of the IRS. For example, tax preparers who are not CPAs enrolled agents, or tax attorneys can only represent taxpayers in limited circumstances, such as preparing and filing taxes.
IRS tax audit representation services provide individuals and businesses with many benefits. These services can help to ensure that your rights are protected during an audit, that you are not paying more than you owe, and that your best interests are represented. Some of the benefits of IRS tax audit representation services include:
Choosing the right IRS tax audit representation service is crucial to a successful outcome. When choosing a representation service, there are several factors to consider, including:
The IRS audit process is the examination of an individual's or business's tax return by the Internal Revenue Service (IRS) to verify that income, expenses, and credits are accurately reported. The audit process can be initiated in several ways, including through correspondence, in-person meetings, and field audits.
Correspondence audits are the most common type of audit and involve the IRS sending a letter requesting additional information or clarification on certain items on the tax return. These audits typically focus on specific issues and can often be resolved by mailing in the requested documentation.
In-person audits are less common but can be more complex. These audits involve a meeting between the taxpayer and an IRS agent at an IRS office, the taxpayer's home, or their place of business. During the meeting, the agent will ask questions and request additional documentation to verify the accuracy of the tax return.
Field audits are the most comprehensive type of audit and typically occur for larger businesses or individuals with complex tax situations. During a field audit, an IRS agent will visit the taxpayer's place of business or home to conduct a thorough examination of their financial records and documentation.
Tax Tips: The IRS will notify you by mail of the IRS audit. The IRS won't initiate an audit by telephone nor they will send you an email.
During an IRS audit, you will need to provide financial documents that support the information on your tax return. This includes bank statements, receipts, and other records related to income or deductions taken on your return. It is important to have all of this information ready before the audit takes place as it could delay the audit process if it is not available. Additionally, if you are using a professional representation service, they may need additional documentation to provide an effective defense.
Tax Tips: By law, you are required to keep all records used for the preparation of your tax return for seven years. Here's a listing of records the IRS may request.
The length of an audit process can vary depending on the complexity of your return and the information requested by the IRS. Generally, a correspondence audit takes a tax period of approximately two to three months to complete while an in-person audit may take up to six months or more.
Common issues or tax disputes that may arise during an audit include discrepancies between reported income and expenses, inadequate documentation to support claims, differences in reporting methods, failure to report certain types of income, errors in computing taxes owed or refunds due, miscalculations or misapplied credits and deductions, or other non-compliance with applicable federal tax laws. Auditors may also request more information to verify accuracy or investigate potential fraud.
At the end of an IRS audit, you and an authorized representative will receive a report detailing the results of the audit. The report will contain information about any errors that were discovered, whether any taxes or penalties are owed, and what action is required to correct any discrepancies. Depending on the outcome of the audit, you may be able to resolve any issues without paying additional taxes, or you may be required to pay additional amounts. In either case, it is important to have a qualified representative on your side to ensure that you understand the results and know how to proceed.
When you agree with the audit findings, it is important to review the details of the report and acknowledge that you are making any changes or corrections as requested. Depending on the situation, payment of any taxes or penalties may be required at this time. If payment of the proposed tax adjustment amount is not required immediately, it will generally need to be paid by a specified date to avoid any additional penalties or interest charges. It is also important to keep all paperwork related to the audit to have a record of the changes and corrections made.
If you disagree with the audit findings, you may be able to dispute the results and negotiate a settlement or compromise with the IRS. Depending on the circumstances, this process can take several months or even longer. It is also possible to appeal the decision to a higher level in the IRS, although this appeals process also must be done within a specified period.
If you disagree with the results of an IRS audit, you have the right to appeal the decision. The IRS appeal process is a way for taxpayers to seek an independent review of their case by someone who has not been involved in the original audit. This review can result in a settlement, eliminating the need for further action or going to court.
Tax Tips: It is important to note that not all cases are eligible for appeal. For example, cases that involve criminal investigations, frivolous arguments, or certain penalties may not be eligible.
The cost of IRS audit representation depends on the complexity of your situation and the type of services you require. Most tax professionals charge hourly rates for IRS audits, and fees may range from a few thousand to several thousand dollars, depending on your needs. Additionally, there may be costs associated with filing documents or obtaining transcripts from the IRS, which can add to the total cost. The average flat fee that we have seen for IRS audit representation ranges between $5,000 to $12,500.
When you file your tax with Tax Planning done with LeRumbaTax.com, we will represent you for free because we stand behind our work 100%. LeRumbaTax.com tax experts have been preparing returns for years and they know how to minimize the risk of an IRS audit. In addition, if you cannot pay for representation, the Low-Income Taxpayer Clinics (LITCs) represent low-income taxpayers before the Internal Revenue Service, assist taxpayers in audits, appeals, and collection disputes, and can help taxpayers respond to IRS notices and correct account problems.
An IRS tax audit is a stressful experience, especially for those who do not have the proper representation. It is important to be aware of your rights and to take action quickly to ensure that you receive fair and accurate treatment from the IRS. Having a qualified tax professional on your side can make all the difference in obtaining a favorable outcome from an IRS audit. With the right IRS tax representative, such as tax attorneys or CPAs you can minimize your exposure to penalties and fines and ensure that all of your paperwork is handled properly. Not only will this make the process easier, but it can also save you a substantial amount of money in the long run.
At LeRumbaTax.com, we have a team of experienced tax professionals who can represent you as a tax audit representative. Our tax experts can assist you in understanding the reason for the audit, compile the requested documents, talk and negotiate with the government, appeal the decision, and find you the best resolution.
