If you have had the unpleasant, even panic-inducing experience of receiving a tax audit notice from the IRS, you probably want to know exactly what lies ahead. A tax audit is simply an accounting practice in which IRS representatives will review your personal or business finances in order to make certain that one or more tax returns were filed accurately. If you are able to conclusively demonstrate that the return at issue was accurate the first time around, the process will end there.
However, if the IRS discovers miscalculations or misrepresentations, you will be responsible for paying any outstanding tax amounts along with interest and penalties. The Maryland tax lawyers at Rosenberg Martin Greenberg have the experience and know-how to help you resolve your tax audit promptly and efficiently.
Investigate the reasons for your audit
Though the IRS has an obligation to inform you of the reasons your return was chosen for audit, the onus is on you to make the inquiry.
There are numerous reasons why a tax return could be selected for an audit, such as:
- Large reported deductions compared to income level
- Inconsistencies from prior year returns
- Cash wages
- W-2 and 1099 amounts that do not match what you have reported
- Automatic flagging by IRS computer programs
- Transactions with other taxpayers undergoing audits
There are even some taxpayers whose audit notices are the result of random selection. However, every audit notice sent by the IRS will include notice numbers which provide insights into particular concerns raised by your return. After you determine the agency's concern with your tax return, you will be able to target your efforts and assemble necessary documentation.
Though the process may feel daunting, the help of a Baltimore tax audit attorney from Rosenberg Martin Greenberg can give you the peace of mind necessary to respond in a comprehensive, timely manner.
Types of IRS audits
The IRS has different ways in which it regularly conducts tax audits, and it is important to understand which one of them is being used in your situation. Knowing how your audit will proceed is essential in determining where your documentation needs to go, what sort of information will be required of you and whether it makes sense to enlist the aid of a tax attorney.
A Taxpayer Compliance Measurement Audit represents an extremely detailed and comprehensive process in which all aspects of a tax return need to be substantiated with documentation. This can even include a requirement that the taxpayer use birth and marriage records to demonstrate identity. The reason these types of audits happen is so that the agency can make updates and improvements to its computer scoring programs, which are used to select tax returns for audit.
Correspondence Audits are audits in which the IRS requests that you provide documents via mail pertaining to a portion of your return. Checks, receipts and other such data may be all you need to provide in such instances.
An Office Audit is one in which you will be asked to bring documentation directly to a local IRS branch office where your audit will be performed.
A Field Audit is a process whereby an IRS agent visits your home, office or business location to conduct an in-person audit. While it is always a good idea to have seasoned legal advice and representation on your side, having an attorney present for a field audit or a Taxpayer Compliance Measurement Program audit is particularly advisable, due to their potentially intrusive and intimidating nature.
At Rosenberg Martin Greenberg, we routinely assist clients faced with any of these audits, providing the guidance and reassurance necessary to comply with all IRS requirements and resolve any outstanding issues.
When a notice of tax audit arrives, one of the first concerns many taxpayers have is whether or not they have the documentation necessary to substantiate their original tax return. Records are critical in securing favorable resolution in a tax audit and it is important that you do not provide the IRS with original documents; always make copies instead. Also, do not provide more information than has actually been requested.
Good organization and presentation of relevant paperwork can work in your favor during the IRS audit process. It gives IRS representatives the impression that you take your tax obligations seriously, and it may even cause the agency to keep its review of your return quite narrow.