Without question, the Internal Revenue Service is increasing the number of audits of American taxpayers every year, and the number of audits has risen every year for the past decade. With the country experiencing a budget crisis and with over 1,000 new IRS agents and auditors recently hired, additional funds have been earmarked for tax enforcement in 2011. Since the tax resolution experts at the Tax Resolution Institute have extensive experience working with the IRS, we know how to help you if you experience such a difficult situation.
It is true that the risk of you being audited in any one year is relatively slim: about 1% if your income is under $200,000, 2% from there to $1 million, and 6% for the ultra-wealthy. Most of the taxpayers selected for a tax audit are self-employed or have unusually large income tax write-offs. However, if you do experience the bad fortune of being audited this year, it’s likely to be for 2009 taxes. Why? Due to a big lag in the system, audit letters typically go out 18 months after the filing date. If you are being audited, here are 4 Key Points to remember when going through this arduous process.
Point 1 – If you delay, it can cost you the right to fight.
If you receive that awful letter from the IRS announcing an audit, make sure you take the action required within the time frame allotted. If not, you could make the situation quite a bit worse. The amount of time given is usually 30 days. If not addressed or contested, the dispute becomes a final assessment and moves on to the collections department. To be blunt, there is zero grace period. If you are unable to respond within 30 day, you have the right to ask for a postponement. In the vast majority of cases, the IRS grants such a request if you say you need the time to track down records.
Point 2 – It helps to have a tax resolution professional on your side.
Three-quarters of audits are conducted by mail, with the IRS simply requesting documentation to cover a specific part of the return. Most of the time, you can handle this type of audit on your own. However, if someone else prepared your taxes, get him to weigh in. If the audit requires an in-person meeting, it will probably get into greater depth on a certain issue. Never go into such a meeting by yourself. Rather, bring along a tax professional who can help you navigate the challenging maze of an IRS investigation and audit.
Point 3 – Always remember that anything you say or write is considered direct evidence and can be used against you.
In any audit or encounter with the Internal Revenue Service, avoid providing any information beyond what is directly asked for by the IRS examiner. You might accidentally give evidence that could expand the scope of the investigation. This is another reason why having a tax professional on your side is essential. In a face-to-face audit, the rule is that the less said the better. By engaging in what seems like harmless small talk, you could incriminate yourself. When you hire representation, you actually do not have to attend the meeting with the IRS examiner. The best way to avoid a slip of the tongue is not to be in the room.
Point 4 — If your IRS auditor refuses to bend, you may be able to gain a foothold by negotiating with their supervisor.
If you are frustrated with your auditor’s finding and overwhelmed by their negative attitude, you can request to speak with their supervisor. As in most bureaucracies, the manager has more latitude to take action and offer possible concessions than the IRS auditor on the front lines. If your problem falls into certain gray areas, this strategy can be particularly effective. Even if the upper-level manager fails to see your side, you can still file an appeal. Due to what is often referred to within the IRS as the hazards of litigation, if a possibility exists that the court will side with the taxpayer, the IRS will choose to settle and offer you a deal.
The continual focus of the Tax Resolution Institute is to help the American taxpayer resolve their tax problems whether it is a looming delinquent tax bill or an upcoming IRS income tax audit. With a track record of no client complaints, we know how to get you the best results possible within the system. If you need tax resolution services, feel free to contact the Tax Resolution Institute at 800-401-5926 or fill out our tax resolution form.
About Peter Y. Stephan
Peter Y. Stephan, executive director of the Tax Resolution Institute, has been helping people resolve large, complex payroll tax problems and personal income tax problems for over 25 years. Peter has written a book "The Ultimate Tax Resolution Guide" and speaks on Tax Resolution topics frequently.