IRS Audits

IRS Audits

IRS Tax Relief: Ask anyone, you’ll have a hard time finding someone who won’t cringe at the sound “IRS Audit”. To be very clear if you end up getting audited, it really is in your best interest to find a tax expert to have in your corner during this process because it is not pretty and can lead to some serious long term problems.

Whatever you do, don’t ignore any notices from the IRS. You will generally have 30 days to respond to most any IRS notices including a notice for audit. However keep in mind if you don’t give any response, the IRS will still take action against you, such as automatically adjusting your tax liability, and the next notice you’ll get is sure to be an IRS tax bill that will probably be for more than you would have liked  it to have been.

Normally, the IRS auditing you are done in person, however about one-third of them are just simply letters asking for an explanations regarding specific items on your personal or business tax returns. These audits could be regarding your entire return or just a small portion that the IRS simple didn’t understand.

If end up getting a letter from the IRS asking specific questions about your return, its best to first talk to who you had do your taxes that year. If you made the mistake of having a non-professional do your taxes that year, I would be a good idea to consult with one to see if there were any mistakes made in preparation. Then Respond in writing, either on a company letterhead or just a professional manner providing all documentation relating to that years filing. Its also always a good idea to send any mail with the IRS certified, that way you have proof they received it.

Do I have to let the IRS into my home?

While no you don’t have to, you may lose deductions because the field auditor would be unable to verify certain facts. The IRS cannot enter your home without express permission by yourself or another resident, unless of course the field auditor has a court order.

Can the IRS end up taking my home?

While the answer is yes they can, the IRS doesn’t want your home. In fact IRS collectors aren’t allowed to act on their own and take your home, the Taxpayers Bill of Rights actually discourages the taking of a primary residence. To end up seizing your home, the IRS must first get a court order but the IRS typically only seizes people’s houses when communications totally break down, it’s the IRS’s last resort.

Can I challenge an IRS audit result?

Yes you can, you have 30 days to appeal an audit report, once appealed you will be allowed a meeting with someone that is not affiliated with your previous auditor (this person is called an appeals officer). If then the appeal ends up failing you can get petition the tax court, which is usually inexpensive and an overall simple process.

IRS Audit Red Flags

While there is really no sure fire way in avoiding the feared IRS Audit, there are a few red flags to be aware of. It could be the difference between getting a letter and getting the full attention of the IRS here are 12 red flags to be aware of:

  1. Failure in reporting taxable income.
  2. Tax returns using home-buyer credits.
  3. Claims of large donations.
  4. New home office deductions.
  5. Exorbitant meals, travel and entertainment write-offs.
  6. Claiming 100% business use of vehicle
  7. Hobby activities claiming a business loss.
  8. Cash businesses.
  9. Failure to list accounts in foreign banks.
  10. High amount of currency transactions.
  11. Simple math mistakes.
  12. Claiming exorbitant deductions.

What to Expect When the IRS Gets Serious
FBAR Penalty
Tax Liens and Levies
Wage Garnishments