IRS Tax Audit
Is an IRS tax audit in your future? Maybe. It gets more likely if you are a business owner. Why? Because the odds of an audit can increase substantially depending on your income, types of income, deduction amount and changes you have made since filing your last tax return. The IRS has a computerized system that checks the information you submitted against information it has received from people you do business with. Some examples of cross referenced items include: payments received by businesses from credit and debit cards, and investors who report the sale of their investments. As for businesses who accept credit and debit card payments, those gross and monthly totals are reported to the IRS by banks and other settlement entities that process the transactions. So it’s important to make sure these amounts are reported accurately on the businesses tax returns.
Let’s face it tax laws are very complicated. And, tax laws change frequently. Trying to impress the auditors with your paperwork or appealing to their “good side” won’t minimize your tax liability. A tax attorney understands what the IRS is looking for and why. I can help you anticipate IRS questions. You may only get one chance to present your best case. Do it right the first time.
Types of IRS tax audits
- Correspondence Audit- Sent to you via US mail. The documents requested for can be sent via US mail.
- Office Audit. A formal meeting is arranged with the IRS tax officials as per their timings and location. You need to take along all the documents and paperwork etc. that have been specifically asked for so as to prove your position.
- Field Audit. This is the most complete type of audit. They are conducted at your place of business. It is best to avoid these if possible. Once the agent is at your place, he or she has a lot more to see and ask about.
IRS tax audit triggers
- Large amounts of income not subject to tax withholding
- Unusually large amounts of deductions claimed (compared to your income)
- A large number of dependent exemptions claimed, tax withholding allowances etc.
- Large deductions for charitable contributions, casualty losses, home office expenses, and travel and entertainment expenses
- Indicating a change of address when not reporting a sale of your residence and not changing your home related deductions
Tax debt negotiation
Tax debt negotiation can reduce your tax liability. There is no need to worry about your tax liability. A tax attorney can give you the help you need. The IRS does have programs that streamline debt settlements. But, you must be an effective negotiator. Giving too much information at the wrong time can hurt your chances of getting a good deal. Let’s face it. We all think that we can do everything. In reality, it is just not true. To be efficient, you must seek help when you need it. A tax debt negotiation is not the time to test your negotiating skills. Dealing with back taxes can be overwhelming and stressful. The sooner you get a tax attorney, the sooner you will have a resolution to your tax liability.
What if the IRS hasn’t contacted me?
Tax authorities will use every available avenue to collect money owed. Even if the IRS hasn’t contacted you in months or years it doesn’t mean that the tax liability disappeared. The IRS is not obligated to remind you about your tax liability. The IRS is more than willing to continue charging you interest and penalties on the debt. What will the IRS look at? During a tax debt negotiation the IRS will look at hardships like periods of unemployment, divorces, or medical issues. If you don’t pay your taxes the IRS may file a tax lien against you, seize your property, summon you to produce financial documents.
No one will be able to get away with not paying their taxes. But, having a tax attorney review your financial situation makes all the difference. Remember, its your situation and you may have already decided the route you believe is best. However, a fresh pair of eyes from a tax attorney will help you to evaluate your chosen course of action. Plus, there may be ways to reduce your tax debt that you haven’t even thought of. Do you really want to leave money of the table?
The IRS won’t mind if the deal is in their favor. They are not the ones who really want a tax debt negotiation. And, the interest keeps adding to the balance until a settlement is reached. Do you really want to spend time learning the law? Or, would you rather get it over with and move on with your life?
What can a tax attorney do for you?
A tax attorney can also provide you with attorney client privilege. So, you can speak frankly about you financial situation. It helps having someone on your side. Be careful in choosing your negotiator. After all, this is your financial documents. Do you want to choose the company that gives minimal training to employees? Or would you rather use a tax attorney that has dedicated their career to providing you with all your legal options? You won’t get the over the moon promises of “pennies on the dollar.” But, you will get a tax solution that suits your needs. Plus, the peace of mind knowing that your financial documents are secure. And, your communications kept confidential.