What Are My Chances of Being Audited by the IRS? So understand that the IRS has very few resources to audit taxpayers taxpayer audits are something that’s fairly time-consuming I mean if you think about what most people think about when they think about an otter they have to send somebody out that person has to look through your books and records they have to make a determination and there’s an investment of time that goes along with it most IRS offices are not particularly well staffed particularly with field auditors which is what most people equate IRS audits? To so you have to understand that the IRS doesn’t have a whole lot to go after people so again they pick and choose what they have based on the resources that they have available the type of audit that has been issued is a good indicator of what the seriousness of the audit is.
rs-irs-audits
If You Are Audited by the IRS Can You Just Pay Them What You Owe and Get Them Out of Your Life?
The IRS then they want to do an investigation to some varying degree.
How Thorough Are IRS Audits?
The captive insurance company so IRS audits tend to be generally pretty thorough.
What Information Am I Legally Obligated to Provide During an IRS Audit?
The IRS agent has the authority to issue a summons for something when a summons is a summons.
How Does the IRS Select People for Audit?
The IRS has been processing tax returns and auditing people for a very very long time.
How Many Years Back Does the IRS Go in an Audit?
The IRS can technically go back indefinitely but it’s only in those cases will they go back longer.
What Is the Best Strategy to Take When Being Audited?
So the first thing that we say to our clients is that you have the advantage in an audit. Number one, you’re the taxpayer and number two, you have access to all the documents so the government is put in a position where they’re asking you for records. You have the opportunity to control both the scope of the information that’s being provided and to control what information you provide so you’re controlling the scope and you get to edit out within that scope what actually gets provided. You have a lot of choice. What I tell our team is “you can’t control bad cards.” So for example if a tax return is unreported by $100,000 in income, you’re probably not going to be able to hide that but the advantage that you get in an audit is you can control the order in which the cards are being dealt. So the very first thing that we do in an audit is we like to know why the taxpayer has been audited. We look at the return and then we go through a pre audit, so we put the tax return through the same level of scrutiny. We’re actually using more scrutiny than what the IRS is going to put it through so we’re looking for issues that could come up. We’re determining whether things are a big deal, a little deal or not a deal at all and so we’re actively looking at those issues and we’re pre-screening things. Once we pre-screen things, then we develop an audit strategy and this has nothing to do with the IRS. This has to do with how are we going to present
If I Get Audited What Is the Likelihood That I Am Going to Get Audited Again?
The issue and then based on how the audit goes what’s the correction.
Should I Represent Myself in an IRS Audit?
Well it depends, but not usually. First of all, the mistake that a lot of taxpayers make is they think that they can handle the audit because they think either a they’re smarter than the auditor or the errors on the return aren’t really that severe. The problem with that is a taxpayer who goes into a situation with an auditor, unless that taxpayer is a tax attorney or a CPA, is probably not going to have the same level of knowledge about how audits work as the auditor. So even if the taxpayer is familiar with the law, the taxpayer is generally not familiar with the way that audits work and the procedure with that and so the risk is that even if the tax loss is minimal, the taxpayer could potentially put themselves into a damaging situation. So for example, if you’re not really used to changing tires and you get a flat tire on the road, yes you could change the tire yourself. There is the possibility that you’ll do a reasonably good job and change the tire and then everything will be okay, but there’s also the possibility that you might make a mistake. If you believe that there is a mistake on your return and if that mistake is significant, meaning it’s over five thousand dollars in tax back to the government, then you may want to consider hiring a representative to help you because once you get into a situation where there’s an audit and their adjustments are being made, then the penalty conversation comes into play and so the more adjustments that are made on the return, the more it increases
Should I Hire the CPA Who Prepared My Tax Return to Represent Me in an Audit?
So your CPA maybe the best CPA in the world and this conversation is not to suggest it anything negative about CPAs whom we work with all the time, who are a huge asset to our practice and I don’t think any of the CPAs that we work with would have any problem with me saying this. The CPAs generally are not good in audits and they’re not good because they don’t do a lot of audits. From a CPA perspective, a CPA is compliance based. CPAs are focused most of the time on preparing returns and preparing them accurately. They have a whole living based on being a CPA which is a certified public accountant. A certified public accountant is an individual who is certified to prepare financial statements so the reality of the situation is when a CPA is charged with compliance, and if there is any doubt as to that compliance meaning, there are errors on the tax return the CPA prepared, then there’s a natural conflict of interest because either