Getting audited is no easy matter, and knowing how to defend yourself is key to preventing the IRS from taking advantage of you.
Sometimes people panic and provide the IRS with too much information or too many documents. But having someone on your side who knows the IRS audit defense process helps taxpayers from possibly incriminating themselves.
Hiring a tax attorney is one surefire way to pump up your IRS audit defense. Everything you tell your tax attorney is protected by attorney-client privilege. That won’t be the case if you hire a CPA or tax preparer. Although tax professionals can and do IRS audit defense, the attorney-client privilege is a factor to be considered.
IRS agents who conduct audits are skilled interrogators. They seem friendly and innocuous at first, but their conduct gets gradually more aggressive as the process continues.
With a tax attorney, you’ll get a solid IRS audit defense by having someone skilled in the IRS’s rules and procedures to review their requests and make sure you don’t give any unnecessary information.
IRS agents will typically ask for a wide variety of financial documents, but the law limits what the IRS is entitled to. Hiring someone for your IRS audit defense can call the IRS’s bluff.
Also, taxpayers can be panicked when dealing with an IRS audit defense and know nothing when it comes to defending themselves. But part of having that solid audit defense is having someone on your side who will prevent you from telling the IRS too much.
Because when it comes to dealing with the IRS, less is more.
Knowing how to acquire a solid IRS audit defense also requires knowing a bit about the IRS auditing process.
The IRS chooses its audits for a variety of reasons based on numerous factors. Self-employed people are more likely to be audited, as are those whose trade borders on being a hobby.
The more money you make, the more likely you’ll be audited. Inconsistent information reported between multiple taxpayers (e.g. a buyer and seller) can raise a red flag. Those that try to avoid taxes by being part of a tax avoidance scheme can be audited, too.
And, there’s also the IRS’s own computer programs that identify audit candidates.
You can increase your chances of avoiding an audit by reporting all of your income, operating your cash-based business ethically, limiting suspicious activity and deductions, and filing an accurate, error-free tax return.
IRS audits happen a variety of ways. They can be done through the mail, with the IRS requesting records with a letter. Other audits happen with a request by the IRS for the taxpayer to visit an IRS office and bring documents. A field audit, where an IRS agent schedules a visit to your home or office, are the least common and are usually reserved for auditing the wealthy.
If you’re having to deal with an IRS audit, make sure to check out our website to learn how to get an audit defense plan in place.
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