Our Tax Attorney’s Complete Guide To Fighting An IRS Audit

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By: Bill Henry
PublishedJul 20, 2018
3 minute read

A man looks over a contract to hire a tax attorney to fight his IRS audit

Audit Representation – Exercise Your Rights in an IRS Audit

Stress, dread, even nausea are common reactions taxpayers have when they receive notice from the Internal Revenue Service (IRS) that the agency is taking a closer look at their tax return.

Emotions like these are not irrational, but with expert audit representation from a knowledgeable tax attorney, you can avoid many audit pitfalls that lead to great financial difficulty.

Four Reasons Why A Tax Attorney Should Represent You in An Audit

Make no mistake, the IRS does have far-reaching powers to dig into your life or business and turn it upside down. Penalties can be steep too. For failure to pay the correct amount of taxes, you can be on the hook for:

20 percent penalty – You can expect to pay this on the portion of any tax underpayment associated with negligence, disavowing IRS regulations, or a significant understatement of tax liability.

75 percent penalty – Watch out if you’ve made a serious underpayment to the IRS through fraud. You can be hit with a 75 percent penalty in this situation and it is up to you to prove that your underpayment is NOT fraud. If you can’t prove this to the satisfaction of the IRS, you can expect to pay 75 percent penalty on the entire underpayment.

Interest – If the IRS charges you with fraud, failure to file on time, negligence, or undervaluation of your property, you’ll also have to pay interest that accumulates from the time your return was due – including extensions – until the day you pay your penalty. In some cases, no interest is charged if the penalty is paid within 21 days.

Incarceration – Serious cases of tax evasion can bring more significant fines, loss of assets, and even in some cases prison time.

When you receive the IRS audit letter in the mail, don’t deal with the IRS on your own. Those who have can tell you that one misstep can complicate and increase your problems. Also make sure you tell your staff not to talk to the IRS at all about the business or the audit if they come to your office.

IRS agents are trained to ask questions in a way that draws out information about unreported income and deductions. Even the most innocent statement on your part can exacerbate your difficulties. This is one of the main reasons it is wise to have legal representation throughout the audit process.

Get Audit Representation from a Skilled Tax Attorney

To sidestep potential problems, it is wise to give a skilled tax attorney, such as the tax attorneys at Castle Rock’s Robinson & Henry, Power of Attorney to work with the IRS on your behalf. Our attorneys can attend the audit on your behalf where we will fiercely protect your rights and financial future.

Your Castle Rock tax attorney can provide services such as these for your audit representation:

Conduct a parallel audit – Using IRS procedures, our tax attorneys will figure out exactly what is raising red flags with the IRS and set out to document the deduction or income that may be causing the problem. Comparing our parallel audit with the IRS’ audit, we will be able to locate any areas where mistakes have been made or there are misperceptions in your understanding or the IRS’ interpretation of what you have submitted.

Represent you with the IRS – You have a right to legal representation in an audit and for this reason, you do not personally have to be present when it takes place. An audit is a civil proceeding. However, if false reporting or fraud is likely, it can quickly turn into a criminal proceeding. Anything you say can be a landmine. Leave your situation in the hands of a knowledgeable tax attorney for best results.

Identify potential reasons for income discrepancies on your behalf – If the amount of money you’ve deposited in your account does not match what you’ve shown on your tax return, the IRS will want an explanation. We will work on your behalf to find the reason for the discrepancy, which could include gifts, loans from the bank, a redeposit of cash, or something else.

Reconstruction of deduction documentation – The IRS expects you to be able to support your claimed deductions with paperwork – receipts, bank statements, and cancelled checks. If such documentation is no longer available, your tax attorney can help you reconstruct your records and prove that you deserve to claim the deductions listed.

Don’t even consider not responding if the IRS contacts you. If you do not respond to the IRS’ audit notice, the agency will make what is called a “summary assessment.” This means they will deny all of your business expenses and assess you with substantial taxes, penalties, and interest. This can be followed up by seizure of your bank accounts, wages, vehicles, and other assets. In other words, taking no action IS taking a very damaging action on your part!

When you receive the notice, call your tax attorney and organize background information supporting the areas in question on your tax return. You will want to discuss with your tax attorney the range of settlement options that will be acceptable.

IRS Audit Appeals

Did an audit not go your way? We understand that many IRS auditors get it wrong. We routinely appeal all or part of the audit, including the tax assessment and penalties.

Contact Us

While the number of audits has increased substantially in recent years, they still happen to only about one percent of the population. If you have had the misfortune to receive an audit notice from the IRS, rest assured that there is knowledgeable help available for you through your tax lawyer. If you have such a problem and reside in Castle Rock, Douglas County, Centennial, Highlands Ranch, or anywhere else in the south metro Denver region, call the tax attorneys at Robinson & Henry for audit representation immediately. Call 303-688-0944 for a no-cost case assessment today.


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