It usually starts with a letter, and it goes downhill after that. Not to upset you, but if you receive an audit notification from the Internal Revenue Service (IRS), act now and relax later. Let’s talk about why.
Overall, the IRS audits about one million returns each year. Perhaps one of the first questions you might ask yourself is, “why did they pick me?” There could be several reasons, here are a couple of good ones:
- Mistakes and mix-ups: A glitch or goof on your tax return can fast track you toward the audit pile. Forget to attach a form? Numbers don’t match up? Lack of due diligence before you sign your return can cost you.
- Your number is up: The IRS uses pre-developed metrics and formulae to select returns for audit. Your return could be selected for purely random reasons (if there is such a thing), or IRS software could score your return within a range of norms that occur frequently on problem returns.
- Friends of friends and other potential sketchiness: If you are involved in business or a partnership with an entity or individual who is selected for audit, suspected of tax fraud, or the subject of an IRS criminal investigation, your return could be an easy target. A past audit, a problem with an offshore tax deal, or involvement in projects or investment strategies that are a focus of the IRS could move you into audit territory.
- Stuff out there: Your return could simply fall into a category being audited this year, or the IRS could be evaluating your tax preparer and catch your return as a result. And, there are always informants who can drop the IRS a line on a taxpayer they think is not paying their share.
If you are selected for an audit, you will be notified by mail. The IRS points out they do not initiate audits via telephone calls. According to the agency, about 75 percent of audits are conducted via correspondence—by mail. The other roughly 25 percent are field audits, which occur at your business, home, or accountant’s office.
An IRS tax lawyer is an important asset if the agency requests the pleasure of your tax documents. Here are a couple of important points to know up front:
- Do not ignore any correspondence from the IRS. Pass it quickly to your tax attorney for scrutiny and advice.
- If the IRS sends you a tax bill and your accountant or tax attorney advises you that it looks accurate, think deeply about paying the bill instead of developing a strategy to avoid payment. Where there is smoke, there could be fire and a quick settlement of a fair tax bill could avoid something messier. Your attorney can help you with that dot-to-dot.
Audits happen. The most important thing about an IRS audit is responding correctly, quickly, and effectively. Your accountant or tax attorney, or both, are your allies in advising you about options and strategies for responding to an audit or other IRS notice.
If the mail brings an unwelcome surprise this tax season, get experienced help.
Experienced tax lawyers help you with criminal and civil tax audits
With offices in Chicago and Cleveland, the legal team at Robert J. Fedor, Esq., LLC help clients respond to IRS audits, and allegations of offshore tax improprieties or tax crime. When you need experienced legal advice locally or abroad, call 800-579-0997 or contact us.