Tax audits are right up there with root canals, dog droppings, and certain members of Congress. Nobody looks forward to them, but they happen every day. It’s the job of the IRS. An audit is not an accusation, nor is it necessarily a reflection of anything you did. It also doesn’t have to be the end of the world. In fact, with the right tax advice, you just might end up getting a refund.
When you are facing an audit, IRS agents suspect that something doesn’t add up. Perhaps you took too many deductions and didn’t save all the receipts. Sometimes, the math doesn’t add up or you made estimations that seemed suspicious. Perhaps, you’re just self-employed, and the IRS knows that the returns of the self-employed generally reveal the most discrepancies.
The most important piece of advice to follow when your facing an audit is to first contact a legal tax attorney before ever speaking to the IRS or providing them any documentation. Most audits or IRS criminal investigations never go anywhere unless you say the wrong thing or provide improper documentation. When you are dealing with an attorney who knows the tax laws, he or she knows what to say and provide that’s directly in your best interest.
It’s also important to work with a tax attorney rather than a tax group. Communications and documents shared between a client and a tax group are subject to IRS review and can be used in court. Anything that takes place between the client and attorney, however, is subject to client-attorney protection and enjoys the right of privacy.
When deciding whom to audit, IRS agents estimate a person’s Discriminate Information Function system average. Using a secret equation, the IRS estimates how likely it is to find discrepancies that result in more money for the government if a return is filed. Large deductions, self-employment, and high income raise the greatest red flags for an audit, as the IRS figures it will likely get something for its effort.
There are ways to avoid a tax audit, and there are even ways to end up getting a refund after being audited. A certified tax attorney can help you with deductions you might not have been aware of, as well as prepare you to deal with an audit from the IRS.
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