If the IRS sees anything on your tax return that seems suspicious or unaccounted for, they may conduct an audit to determine if there was any unreported income or overstated deductions. For these reasons, Schedule C, Profit and Loss from Business, is the most IRS-audited part of all tax returns.
An Alexandria IRS audit and appeals lawyer could help you prepare for the audit and navigate it properly. Diligent preparation could increase your chances of a favorable outcome – with the possibility of an official appeal if you believe there was an error with the findings.
Audit notices come in the mail and will explain that the IRS intends to audit a particular tax return, which could be either a personal income tax return or a business return for a given year or period of years. Sometimes they are interested in auditing only one aspect of the return. In such cases, the audit notice will describe what they intend to review; however, an audit can expand to other items of a tax return and other years.
The IRS has various selection criteria for selecting a return for examination, including:
These are common reasons that the IRS flags somebody’s returns for audit, but many other factors could influence an audit decision.
The audit notice will describe the documents that the IRS wants to review and assembling the requested documentation is often the most time-consuming aspect of an IRS audit. An Alexandria attorney could review the IRS audit notice and the taxpayer’s records to ensure compliance with the request.
Many audits are correspondence audits in which the IRS requests copies of specific documents. Once the taxpayer complies with the request, the IRS reviews the produced documents at their offices and informs the taxpayer of their findings when the audit is complete.
Field audits are more complicated, and will take place at a local IRS office or the taxpayer’s business. It is important to work with an Alexandria attorney if the IRS is conducting a field audit. They could handle communication between the taxpayer and auditor, and be present while the auditor reviews documents. In most cases, the taxpayer does not need to be present at the field audit and can be conducted from the office of the taxpayer’s attorney.
When the audit is complete, the IRS will send the taxpayer an examination report. The report will detail any financial discrepancies or misapplication of the law that they identified during the audit. The examination might result in a refund of overpaid tax, a finding that the tax paid was correct, or an assessment of additional tax due. If the IRS assesses additional taxes, the taxpayer has the ability to pay the balance in full in one payment or request an installment agreement to pay over time.
A taxpayer can request the IRS Independent Office of Appeals review the decision if they are dissatisfied with the audit’s results. When the audit resulted in a tax assessment of less than $25,000, the taxpayer could file a small case appeal. If the assessment exceeds $25,000 or the taxpayer is a partnership or S-corporation, the small case claim option is not available and the taxpayer must file a formal protest of the tax assessment.
A taxpayer must file a request for an appeal within 30 days of the date of the Letter 525. The appeal must describe the findings the taxpayer disagrees with and the reasons why they believe the audit result is incorrect. It is advisable for a taxpayer in Alexandria to have an IRS appeals attorney draft the appeal on their behalf.
In many cases, the Appeals Office will schedule a conference by phone or in person to discuss the issues in dispute. If the conference does not resolve the issue, a taxpayer could file a complaint in U.S. Tax Court. Very few cases end up going to Tax Court; almost all tax disputes reach a reasonable resolution through the appeals process.
No matter your opinion on why the IRS selected you for an audit, you must closely follow their procedures. Finding an Alexandria IRS audit and appeals lawyer to handle the process is usually a wise and cost-efficient decision.
Pontius Tax Law, PLLC is a tax law firm that strives to resolve sensitive tax problems through trust, dedication and value. The law firm was founded by John Pontius with offices in Washington, DC, Rockville, MD, Bethesda, MD, Vienna, VA, and Alexandria, VA. Mr. Pontius represents individual and business clients with sensitive and serious tax matters before the Internal Revenue Service and state taxing authorities. His client base is local, national, and international.
Over the course of his career, Mr. Pontius has represented businesses and individuals with complex tax issues in the following areas: FBAR examinations, offshore and domestic disclosures, FATCA, FIRPTA, tax planning, unfiled tax returns, release of tax liens and levies, trust fund recovery penalty, IRS and state audit examinations, as well as appeals, penalty abatement, U.S. Tax Court litigation, along with defense of tax fraud and evasion. If you require assistance from a tax lawyer, contact Mr. Pontius to discuss your situation.