When a taxpayer is audited, they often have many worries no matter how strong or accurate they feel their tax reporting was. After all, if something is deemed incorrect, will you end up paying thousands in extra taxes with no recourse? In fact, you do have a variety of options when you disagree with an audit. To help you better understand your rights, here are a few answers to pressing questions.
Is There Room for Disagreement?
Most people are probably not aware that the tax code—while very detailed in other areas—does leave some elements surprisingly up to interpretation. For many items, only "guidelines" are issued because every single scenario cannot possibly be covered.
For instance, a deductible business expense must be deemed "reasonable and necessary." How do you define this within your own business? You may feel that attending a seemingly unrelated conference is reasonable and necessary if that's where you network to build informal leads. But the auditor might not agree with your assessment. If you end up at an impasse, you may need to take the matter to the next level.
What Should You Do If You Disagree?
The IRS has a few options for those who can't reach the same answer as an auditor. You can appeal the findings through a scheduled appeals process. You may also be able to seek mediation through the fast track settlement program. You can also take the matter all the way court where a judge will hear both sides and issue a ruling.
Whichever route you feel is necessary, you should have a tax attorney and an experienced accountant on your side. The accountant can help with ensuring that your records meet IRS standards, that your current and prior tax forms are in order, and that your position is based on the right IRS regulations or guidelines.
A tax attorney's role will be to help you take the best path toward resolution—appeal, mediation, or litigation—for your circumstances. They will also know the legal steps necessary, such as waiting for the "90-day letter" or notifying the correct IRS office to ensure you follow the rules. And finally, if you do opt for your day in court, a tax attorney is the one who can represent you to the judge.
When Should You Begin Planning?
The earlier you bring in a team to aid your case, the better. As soon as you decide that you may need to take the next steps after an audit, consult with a tax attorney. They will advise on how to proceed and ways to avoid unnecessary complications. Don't have an attorney yet? Start today by consulting with one in your area.Share