Tax audit defense is simply a service that allows a tax audit professional to give you full tax audit representation during your tax audit. Of course, you can handle your tax audit yourself or give it to a professional, the choice is completely yours. However, it is often better to let a professional handle your tax audit defense due to the reasons outlined in this article.
Before you understand tax audit defense you should understand what IRS Audit means. It is simply an assessment and examination of both your business and individual financial information to be sure that you have provided accurate information according to the tax laws of your state. However, if you mistakenly inflate your income and you get more tax, IRS agents will see it as a genuine error but if you mistakenly unreported your earnings, no IRS agent will accept it to be a mistake. Unfortunately, it could be a genuine error. This is one of the biggest reasons you should let a professional handle your tax audit defense.
Major Types of Tax Audits: Correspondence Audits, Office Audits, and Field Audits
A correspondence audit is for fixing minor errors on your recent tax returns. It is so named because it can be handled via mail.
An office audit is a little more complex. You will need to visit the IRS office with the required documents. If the IRS feels that your taxes need to be audited, you will get an invitation that includes all the necessary documents that you should bring along. It is at this point that you can hire a tax attorney to represent you.
A field audit is similar to an office audit but it is IRS officials that will visit you. They can choose to visit you at home, in your accountant’s office or in your business premises. If you don’t like a field audit, you can ask for an office audit and give reasonable explanations. However, there is no guarantee that your request will be granted because the IRS believes that the main reason people shy away from the field audit is that they have a lot to hide.
Can A Tax Audit Be Postponed?
You can also apply for a postponement of the audit through the auditor assigned to you. The postponement is also not guaranteed. The IRS auditor reserves the right to grant your request or turn it down for a good reason.
While your letter of invitation will usually include all the documents you should take along, here is a list of what the IRS usually asks for. Bill, receipts, investment statements, business travel logs and tickets, loan agreements, legal papers, proof of income, bank statements, 1099s, and W-2s.
Consult with a Tax Audit Defense Lawyer
Here are the reasons you should let a tax audit professional handle your tax audit defense and represent you.
1. Tax Audit Defense Lawyers Can Eliminate Errors
Usually, tax returns take about 30 days to effect after filing but it can be delayed when there are mathematical errors in the figures tendered. Missing entries in some sections can also cause delay and most commonly when there are discrepancies between the estimated taxes paid and what is in IRS’ record.
The chances of any of these mistakes occurring will be very high if you handle it yourself. So, it is better for tax defense attorneys to handle your tax debt relief application. You want to make sure you know what to provide the IRS or State, more importantly, what not to provide.
2. Tax Audit Defense Should Be Done By a Tax Lawyer Because They Understand the Rules
Tax audit defense lawyers understand the rules inside out and they also understand how IRS officials operate. They know that IRS looks for discrepancies. Sometimes, in the course of explaining a situation to IRS officials, you will mistakenly expose yourself more than necessary and IRS officials will capitalize on the area. Again knowing what not to say or provide becomes a key benefit of hiring a Tax Pro.
So, it is better to let professionals handle it. With each question asked by IRS officials, they are aiming at something that is often not obvious initially. So you should allow an expert to handle your tax defense. Besides, IRS officials are always looking for more ways to increase your taxes and they have strategies and collection tactics for that. It is only experienced tax experts that understand these strategies.
Sometimes the mistake may sound like fraud to your IRS auditor and he will not hesitate to refer you to the Criminal Investigation Division (CID). Indeed, truth be told, when it comes to tax issues, some genuine errors sometimes look deliberate. Professionals will help you avoid such.
3. Professional Tax Audit Defense Gets You Better Result
When IRS officials find out that you are being represented by a professional, they tend to sing a different tune. It often leads to faster turnaround time as well. This is because IRS officials understand that the tax lawyer understands the law and IRS code.
4. Professional Tax Audit Defense Lower Documents Request
Failing to send the right documents may delay the auditing of your taxes and there are documents you should never send to IRS. Even though they don’t need it, they will scrutinize them in hopes to find additional information exposing you even more. And because they have been trained for such, they often find leads in those additional documents.
So, you should be very careful when sending documents to the IRS. This is why it takes professionals to know the tax law and what needs to be provided. Hiring a tax defense attorney is always a good idea.
Most importantly, hiring a lawyer for tax audit defense means that you don’t have to speak to IRS officials yourself. Finally, it is important that you keep all the records used for preparing your tax returns for at least three years before discarding them.