If you’re facing a tax audit, one of the best ways to protect yourself is to retain a qualified professional to help you with your tax audit defense. There are several tips you can follow to prepare yourself for your audit and get the most out of your defense. These include finding a tax professional who practices before the IRS or state, and knowing the differences between an office audit and a mail audit.
Office audits are more in-depth than mail audits
During an office audit, the IRS will ask questions about your tax return, your financial position and your personal life. This process can be terrifying and stressful. However, you can help protect yourself with a qualified IRS audit attorney.
Typically, an office audit will be more in-depth than a mail audit. The IRS will require you to provide specific documentation to support the claim on your tax return. These documents may include your employment records, tax returns, receipts, bank statements, medical records and other items.
Depending on your circumstances, an IRS audit can take weeks or months. An experienced auditor will be able to analyze your returns and identify questionable items that need to be investigated.
When you receive an audit notification, you have 30 days to respond. This will give you time to gather any documentation that is requested, if you have any. You will also have an opportunity to meet with an IRS representative or a tax attorney.
Sales tax auditors often suspect people of overstating expenses to wrongly limit tax liability
Sales tax audits are conducted by auditors to determine whether a taxpayer’s claimed amount of tax is correct. The IRS uses a few techniques to help assess this question. Among these are tracing postings for sales invoices, reviewing the Chart of Accounts, and evaluating the various debit and credit entries.
Generally, the first part of a sales tax audit is the examination of the taxpayer’s certificate file. This is followed by an analysis of the working papers and cash receipts records. While examining these documents, an auditor should be aware of the taxpayer’s internal control system.
For the most part, the IRS uses a short test to verify the accuracy of the reported totals. A percentage of error can be used when the cost of goods sold (COGS) records are adequate. During the examination of Gross Sales, the IRS may make an adjustment for any unreported taxable purchases.
To determine the smallest or the largest item, the IRS may employ the “percentage of error” method. This is often useful to construction companies, as it can allow them to make a better estimate of their sales.
Finding a tax professional who practices before the IRS or the state
If you find yourself in a situation where you are being audited by the IRS or another taxing authority, you should get help from an experienced tax lawyer. An attorney can help you develop a plan to avoid problems, limit the scope of the audit, and even counteract the aggressive nature of the examiners. They can also identify irregularities, such as legal misinterpretations, and can intervene on factual issues.
Tax attorneys can often lower your civil liability, if you are found liable for taxes, and may be able to assert non-tax related defenses. Some lawyers can even spot the potential for criminal tax investigations. A criminal tax investigation can last for years, so you want to act as quickly as possible.
An IRS or state taxing authority will typically contact you if you owe $5,000 or more in back taxes. You will then be given 30 days to submit the requested information. This may include documents and bills.
Cost of retaining a tax audit defense
If you’ve been selected for an audit by the IRS, you should consider retaining a tax audit defense expert. The process can be difficult and time-consuming, and it can cause you great stress. However, most taxpayers find the cost of retaining a professional audit defense firm to be worth it.
When you receive an audit notice from the IRS, you’ll need to gather all the information they need to examine your tax records. Depending on the nature of your audit, this may take weeks or months. Once you have all the information, you’ll have to meet with the IRS to discuss your case. This will also require you to provide additional documentation.
When you decide to hire a tax audit defense expert, you’ll need to sign a Power of Attorney. This document lets you authorize a representative to act on your behalf in all matters pertaining to the audit. During an audit, the representative will negotiate with the IRS to reverse any findings.