CPA Ted Kleinman provides aggressive, experienced audit representation for taxpayers across the globe, including US citizens, resident aliens, nonresident aliens, US expats living abroad, and US and foreign companies. If you or your business has been selected to undergo auditing by the IRS or state tax authorities, Ted Kleinman can help you gather and evaluate financial documentation, represent you in all proceedings, work to mitigate potential penalties, and protect your legal rights throughout the audit process. Whether you have been chosen for a correspondence audit, an office audit, a field audit, or any other type of state or federal tax audit, look to US Tax Help for dedicated service you can rely on. Contact us online for a consultation, or schedule an appointment today.
IRS Audit Triggers
There are many reasons that you or your business might have been chosen for an IRS tax audit. While some audits are triggered by random computer selection, many are initiated because the IRS believes there is an unresolved issue in need of closer examination, such as unfiled returns, the tax credits you claimed, or the financial information you supplied regarding US or foreign income. The following factors can all increase your odds of being audited:
- Claiming large or numerous tax deductions, particularly deductions for business expenses, charitable contributions, or medical expenses
- Doing business with companies or individuals who have been audited in the past
- Earning a high level of income, particularly above the $200,000 threshold
- Having foreign income or bank accounts, including overseas checking, savings, or business accounts
- Improperly deducting hobby losses on your tax return
- Operating a business that conducts most of its transactions using cash instead of debit or credit card payments
- Owning your own business or being self-employed
- Reporting substantially higher or lower income than you did on the previous year’s income tax return
- Sending large amounts of money into the United States from a bank outside the US
- Supplying outdated or incorrect personal information, such as the wrong Social Security number (SSN), on your tax documents
IRS Audit Process
The tax audit process varies slightly from one case to the next, not only due to differing reasons for taxpayer audits, but also because there are several different types of audits for which you may be chosen. The three main types of IRS audits are correspondence audits, office audits, and field audits.
As the name suggests, a correspondence audit is conducted through the mail. The IRS may request that you supply various financial records and statements to corroborate the information you provided on your tax return. For example, the auditor may wish to examine invoices or receipts. Because it is the simplest type of audit, a correspondence audit is typically used to resolve errors and issues that are relatively minor in scope. Nonetheless, the potential for penalties or a more intensive examination makes audit representation essential.
An office audit is more involved than a correspondence audit. As the name again suggests, office audits are conducted at various IRS field offices throughout the US. A qualified personal representative, such as a CPA, may be able to attend the office audit on your behalf. Office audits go into deeper detail than correspondence audits.
A field audit is the most intensive and invasive type of IRS audit. The IRS typically calls for field audits in situations where the IRS believes that substantial noncompliance has occurred. In a field audit, the auditor may visit your place of business or even your private residence to collect and investigate various financial records. The process may take anywhere from a day to more than a week, depending on the scope and complexity of the audit.
What if I Disagree with the Audit Results?
There are three possible outcomes to an IRS audit:
- You are able to verify all of your information with the requested evidence. The IRS does not require you to take any further action.
- The auditor determines you are liable for additional taxes. You agree with the findings, and make arrangements with the IRS for paying the amount you have been determined to owe.
- The auditor determines you are liable for additional taxes. However, you believe the auditor made a mistake.
If you believe the auditor made an error, there are several actions you can take to dispute the findings. Depending on the circumstances, there are three possible courses of action:
- You may ask for a conference with the auditor’s manager. This is known as a “supervisory conference.”
- You can explore the IRS’ alternative dispute resolution (ADR) programs, such as appeals mediation, with help from a CPA. Mediation is a confidential, relatively informal session between the taxpayer and a trained mediator called an “appeals officer,” whose role is to oversee and facilitate the proceedings as a neutral party.
- You can file an appeal, provided enough time remains with regard to the statute of limitations. In order to request an appeal, you will need to submit a written letter of protest. Your letter of protest needs to contain specific types of information in order to be considered, including, but not limited to, your contact information, a statement that you wish to appeal, the findings you disagree with and why, and the laws or facts which support your argument. You may appoint a CPA, or other tax professionals, to act as your representative during the IRS appeals process.
IRS Tax Audit Representation for US Expats and Foreign Nationals
Whether you live and work inside or outside of the United States, the IRS is extremely vigilant when it comes to ensuring the timely reporting of foreign and US income. The IRS coordinates with government agencies and financial institutions all over the world, using state-of-the-art technology to detect suspicious and unusual activity. Failing to file personal or business tax returns, failing to report all of your worldwide income, improperly claiming credits or deductions, or simply earning a high level of income can all lead to a tax audit, with potential for disastrous consequences.
If you have been chosen for an audit, whether by the IRS or a state tax authority, the time to begin preparing your audit defense strategy is now. For a consultation with an experienced CPA, contact US Tax Help online, or call (541) 923-0903.