Audit. Even the most affluent taxpayers get goosebumps just thinking about it. For many people, this feared procedure means dreadful visits to the IRS office or visits from revenue agents.
An audit is an assessment of back taxes, interest, penalties, and maybe even criminal sanctions. Those who are unfortunate enough to obtain unfavourable audit adjustment rulings have more options than they know. Audits can be challenged in the same way that other court decisions are, and in many situations, the Office of Appeals reverses, or at least alters, the initial audit’s conclusions in favour of the taxpayer.
How does appealing an IRS audit work?
Once you are audited, the IRS will request documentation. You’ll be asked to provide them this documentation, and then the auditor will make an initial assessment. They will then allow you to respond to them. But if they don’t like or they don’t agree with what you provided, that assessment will go on your account.
The next option you have is appealing to a tax court. What happens if you appeal to a tax court? Well, it doesn’t automatically go to tax court. Your case goes to an IRS settlement officer first.
This is a very important distinction because the settlement officer wants to settle your case before it goes to court. So, if ever you’re in an audit and you’re having trouble negotiating with the auditor, your best bet is to allow it to go to a settlement officer. Someone that is more likely to settle the case and give a proposal or maybe meet you halfway. Which is why it’s a great way to save money on an audit.
Most of the time, people just want to pay the notice or they think there’s no other option, but taking this next step, you can save yourself potentially thousands of dollars.
There are three compelling reasons to appeal an audit, as well as two lesser compelling reasons not to.
PROS
1. If you don’t hire a tax professional, which isn’t generally essential for success, appealing is straightforward and quick.
2, In the vast majority of situations, appealing for an IRS audit results in some savings.
3. Your audit tax bill will be delayed for months if you file an appeal, giving you time to examine your payment alternatives.
CONS
1. The appeals officer has the ability to bring up concerns that the auditor overlooked, although this virtually never happens. If you’re worried that a missing item will be discovered and you’ll owe a lot more in taxes as a result, you can opt out of the appeal. In this situation, you can move straight to tax court, where you won’t be able to present any new problems.
2. While you are appealing, the tax bill’s interest (and possibly penalties) continue to accrue. When compared to the probable tax savings from most appeals, this is usually a minor expense.
What should I do if I get audited?
If you get a notice from the IRS indicating that an audit is coming, please call us right away so that the best course of action can be decided and strategized. Even if you don’t believe you’ve done anything illegal or aren’t sure why you’re being audited, we don’t recommend representing yourself.
We have the knowledge and experience to handle any IRS audit. We can walk you through the entire process to take the worry out of it and make it go as easily as possible. Please do not hesitate to contact us.
