Even businesses would agree that having to contact the IRS (Internal Revenue Service) is among the most stressful experiences people can go through. One way that the IRS looks at someone's financial records and tax returns is through an audit. An audit is in place to double check the accuracy of someone's financial records and tax returns to make certain that IRS tax laws are being followed. While some audits are merely routine exercises and are wrapped up in no time, others can become quite complicated and drawn out. Those can also become expensive. That is one of the reasons why an IRS audit attorney should assist you.
What Is an IRS Audit Attorney?
When you have to face an audit, an IRS audit attorney can help you out. This is a lawyer who specializes in tax law, helping out their clients to prepare for IRS examinations and audits. While accountants and enrolled agents help prepare, IRS audit attorneys can actually help you legally. They're licensed legal professionals who can help you with legal guidance and advocacy in disputes, and can protect you under attorney-client privilege. Their primary goal is to help you make sure to get the most out of the audit.
Why IRS Audits Happen
The IRS can start audits for several reasons. Common reasons include errors in arithmetic, income that is not reported, unusually large expenses, differences between reported income and income shown on other records, and random selection. For businesses, self-employed, and high income earners the IRS audits them at a greater rate due to the complexity of their tax returns.
Some audits are handled by mail and are called correspondence audits. Other types of audits, field audits and office audits, involve meetings with the IRS in person. These audits can involve much more complexity and consequently more money out on the table. This is where having an IRS audit attorney becomes invaluable.
The Responsibilities of an IRS Audit Attorney
An IRS audit attorney advocates for clients on the legal and strategic side of things. Tasks include:
- Notices and returns review: The attorney goes through IRS correspondence and audits to determine what parts of the tax returns are within the scope of the audit.
- Documentation preparation: Helping the taxpayer gather, sort, and present financial records that demonstrate the taxpayer’s position and advocacy.
- Liaising with the IRS: The attorney will function as the lead contact for the IRS which minimizes contact between the taxpayer and IRS.
- Taxpayer rights protection: Audit attorneys make sure IRS agents follow the rules and stay within reasonable and legal bounds.
- Protection of taxpayer rights: Audits attorneys make sure IRS agents follow policies and exercise reasonable and legal discretion.
- Negotiating outcomes: The attorney can negotiate the implications from the IRS such as, but not limited to, the possible discrepancies, penalties, interest, and/or payment plans, payment plans, and interest, if any.
IRS Audit Attorney vs. CPA or Enrolled Agent
Many taxpayers have the same question. Should they hire a lawyer or stick to a CPA or EA? For most cases, a CPA or EA would suffice for tax preparation and even representing you in front of the IRS. However, IRS audit attorneys become necessary when:
- There are considerable financial risks involved in the audit
- There are allegations of fraud or potential criminal wrong doing
- The case has the potential to go to tax court
- There are complicated legal issues involving the interpretation of the tax law
Unlike CPAs and EAs, you have legal privilege with attorneys. This privilege is important if the audit were to reveal sensitive issues that you would want to keep from the public eye.
Benefits of Hiring an IRS Audit Attorney
Peace of mind is one of the most beneficial advantages of hiring an audit attorney during an audit. For those that are not well versed in the complexities of tax law, audits can be scary. Working with an attorney that has experience with the IRS and the system is much easier.
Also, an IRS audit attorney can lessen the impact an audit has from a financial standpoint. Audits can come with more tax assessments and added interest with penalties, but that financial burden can be lessened through documentation, legal argumentation, and negotiation. In some cases, the arguments and documentation can be put to use to have the penalties waived altogether when a reasonable cause is presented.
Audition attorneys can also help business owners protect the functions of their ongoing business activities during streamlining disruptions and also compliance.
When Should You Hire an IRS Audit Attorney?
Not every audit requires legal representation, but certain situations strongly indicate the need for an attorney. You should consider hiring an IRS audit attorney if:
- You receive a notice indicating a field or in-depth audit
- The IRS alleges underreporting or tax evasion
- A big sum of money are at stake,
- Unsure how to respond
- The audit involves multiple years or complex transactions
Early involvement of an attorney can prevent mistakes that might worsen the situation.
How an IRS Audit Attorney Helps During the Process
An audit process usually starts with notice from the Internal Revenue Service. An audit attorney will then look at the notice carefully and figure out how to respond. They will request for an extension, specify the scope of the audit, and/or contest unreasonable requests.
The attorney makes sure that the IRS agents are only given information that is relevant. This is very important since giving information that is extraneous could unintentionally cause additional problems or broaden the audit.
If there is a difference of opinion, the attorney could challenge the IRS findings formally, provide legal reasoning, and take the matter to a higher level through legal appeals if need be.
Choosing the Right IRS Audit Attorney
Choose a great lawyer, and find one with a lot of experience with IRS audits and tax issues. They need to understand tax law, negotiations, and arguments and how to do them well and make them all come together. They need to be good lawyers, of course.
Before hiring one, find out how they make money and how they will handle an audit. Also ask them if they have experience with this type of case.
Conclusion
A qualified IRS audit attorney is a strong advocate to have on your side when handling IRS matters. If you are a business owner or an individual taxpayer, the right legal representation can greatly impact the results of an audit. An IRS audit attorney provides legal services so that you can shift the focus of your attention away from the stress of the situation to a more organized and manageable process. If the situation is serious, the legal help that you have is more than a convenience; it's a necessity.
IRS audits can be scary and stressful, but you are not alone. An IRS audit attorney can help protect your rights and deal with the IRS so that you can focus on your life and business. They will help reduce consequences such as paying additional taxes and penalties. Get the help you deserve so that you can have peace of mind before you get in over your head. Reach out to Dimov Audit today for a confidential consultation and let us guide you.
