jeff raford finance taxes relief: IRS Audit Tips and Secrets Get the Tax Audit Relief You Deserve!

Tip For When You Receive an Audit Letter

Decide if you will be doing the audit yourself or hiring a CPA. One mistake people make is to assume that because you have all your receipts, read a tax guide, and used tax software, such as Turbo Tax or Tax Act, that the audit will go smoothly. Sorry, but the IRS is trained to intimidate people out of deductions. Another mistake is to assume that the person who prepared your returns is the correct person to represent you. Yes, they are familiar with you and your return. However, that is not a prerequisite for being good at audit representation.

If You Will Handle Your Own Audit...

You should attempt to schedule an appointment at the IRS office. Do not set up the appointment at your home or office. You do not want the auditor snooping around. Who knows what they will make out of what they see! You should attempt to schedule a date that allows you enough time to adequately prepare for the audit. This includes contacting third parties for invoices, receipts, schedules, notarized statements, etc.

Understand your rights beyond the Taxpayer Bill of Right. Research our website and others' to understand the reasonableness of positions you want to take regarding you income and expenses.

Using the IRS Departments Available to You

Understand the audit report, how much time you have to respond, etc. Know about the audit manager and appeals. Understand the notice of delinquency and filing a tax court petition. Know when to file an appeal. A lot of this information is available on our website. You may want to sign up for our one hour consultations. We explain in a lot of detail, giving you confidence to handle your own audit. Of course we never recommend that you represent yourself in an audit unless you absolutely do not have the money to hire a CPA firm.

Never Go To an Audit Unprepared

There are guides you can buy that will help you prepare. I cant stress this enough. Auditors are trained to sway you to believe in their interpretations of the tax rules. Being prepared means you understand why you are entitled to your treatment of a tax issue, income, or expense item.

Expect to Owe Something

The IRS assumes that most people can't support their tax return in the manner that the IRS requires. Sometimes we get "no change" audit results. Auditors usually like to look good to their manager. Managers require that audit work papers contain copies of support documents. When the auditor doesn't have documentation to support their work papers, they will deny a deduction. You can beg all you want, but if they don't think their manager will be happy, they will deny your deduction. Be prepared to give them some adjustments in their favor, or you are setting yourself up for disappointment.

Don't Volunteer Information

Answer all questions with short, to the point answers. Long-winded explanations open the door for further questions. They also show your emotions. IRS employees are trained to use your emotions against you.

Don't Bring Copies of Other Tax Years

The auditor is only supposed to audit what is in the audit letter. If they want to audit other years then they need to issue letters stating these years are under examination.

Best Audit Tip of All

Hire the most experienced, best qualified CPA firm you can find. Why? Because CPA's are held to the highest professional standards. It's extremely rare to find out that a state's Attorney General's office is going after a CPA firm. The State Board of Accountants will resolve fraud matters way beforehand! As for the T.V. hucksters and their many complains and Attorney General fines...Well, just do some diligent research and you'll see.

Consider hiring a reputable CPA firm with a lot of tax audit experience.

You ask...

If you don't file income tax returns, can you be audited?
What if I refuse an IRS audit?

The Filing Secret

The IRS requires each person who meets the requirements for filing to file an annual return of personal income. Businesses must file annual income returns to account for the money they collected and how they spent it. Individuals whose income is low enough to meet an IRS exemption to filing can avoid filing for that year. We suggest you file anyway to avoid the IRS filing for you. They will either file a Substitute For Return (SFR) or summons your records. Without your signature attesting that the income and expenses on your return is true and accurate, they wont have your statement as evidence against you, in case you were wondering. It's better not to file than to file a fraudulent return.

The Audit Letter Secret

The IRS starts out with a letter stating that they are just going to examine a few items. Then the scope of the audit expands to even more items. Then it expands to other tax years. It might even expand to your employees, ex-spouse, parents, kids, siblings, etc. They will follow an audit money trail wherever it leads. Can they do this? Mostly, yes, but you can slow them down or stop them if you know your rights. We can be of great assistance during each of the audit stages from the first letter to the completion.

Auditors Are Nice At First

In the first meeting they usually start out friendly getting you to talk so that you can disclose additional information to them. They eventually become more aggressive. Usually they will then make a written request for bank statements, canceled checks, deposits, receipts, logs for vehicle mileage, and all other expenses. Sending these documents to the IRS without first making sure that they support your position in the audit can be dangerous. The majority of audit reports I've seen have adjustments far in excess of what they should be.

Best Way To Not Get Audited

With over 30 years of preparing tax returns, I know a secret that the IRS won't tell you. After hours of research, I still could not find statistics from the IRS that show a breakdown of what percentage of returns are audited based on when the return was filed. For example, what percentage of current year returns are audited if filed...

...before April 15th?
...after April 15th and before October 15th if no extension is filed?
...after April 15th and before October 15th if an extension is filed?
...after October 15th?

We and other CPA's have found that if you file an extension until October 15th and file just before that date, that your chances of being audited are close to zero. Years ago, you had to file a second extension, and give them a good excuse to get to October 15th, but now the automatic extension gets you to October 15th. Of course your return needs to be "window dressed" properly: no math errors, odd items explained, and numbers not far out of line. For example, if the return shows you earned $40,000 and you had mortgage interest of $35,000 with no explanation, then you will increase your chances of an audit. Let me put it to you this way: I've been doing tax returns since 1975. In all my years, I've never heard of anyone being audited who, after filing an extension until October 15th, filed their tax return within the week leading up to the 15th. You may be audited even following these rules if your returns look bad on the surface or if you are already part of an in progress investigation.