What is an IRS Tax Audit?
The IRS is auditing thousands of taxpayers every day. Chances are that at some point - especially if you are self-employed, have significant investment losses, have rental real estate or large deductions - you will be subject to an IRS or State Tax Audit.
An audit is defined as an “official examination and verification of accounts and records, especially of financial accounts.” An audit is a potentially complex and invasive process - and you should never go it alone.
Three IRS Audit Types
There are three major audit types the IRS uses:
- Correspondence – The IRS Conducts Audit by Mail
- Office Audit – You are required to appear at an IRS office
- Field Audit – The IRS auditor will make announced or surprise visits to your home or office
If we are your representative, you will generally not have to speak or meet with the IRS directly. We will handle those communications for you.
Why Should You Call a Lawyer?
IRS agents are looking to find information to assess your tax. They are experienced and trained in asking leading questions that may seem innocent at first, but are designed to get the information or confirmation the IRS wants.
Answering even a few questions can quickly expand your audit scope if you if you lack legal representation and answer these questions 'wrong'.
What may start out as a friendly conversation will often turn into an aggressive interrogation, discussing multiple years, multiple items and potentially areas of your return that were not initially noted as part of the audit scope.
The IRS often asks for broad swaths of information - and that is usually not the best strategy. The strategy in an audit is to keep the scope limited, focus the agent on only those areas that are relevant to the audit scope, and give them only what they ask for - and nothing more, unless it expressly supports your case. That's why you need legal representation to review your case and protect your interests.
The IRS may ask to visit your home or office. This may feel like a convenience, but they are also looking at your assets, lifestyle, and want to create a comfortable environment for you so that you will be more cooperative. Remember, the IRS Agent does not have YOUR interest first - they are out to collect additional taxes they believe you owe.
Rely on Tax Professionals to Handle Your Audit
You don't want to go it alone. The IRS is going to be at an advantage. They know the law, they know taxes, and they do audits for a living..
If you think there may be a criminal matter, or you hear the words "perjury" or "fraud", you will want an attorney - not just a CPA or EA - to represent you. Only an attorney had full attorney-client privilege with the IRS and the courts.
Dot't take on audit defense on your own - and don't rely on a non-attorney. At Centerbridge, all our attorneys are also Certified Public Accountants and focus on tax representation. Don't settle for less protection than you deserve.