We Help With IRS Audits & Appeals
You probably found us by searching for “IRS audit attorney” or “tax audit lawyer.” We are glad you did. We can help you with your IRS audit.
We are tax attorneys in Houston and we have handled a lot of IRS audits. This includes audits for hundreds of millions of dollars for Fortune 500 companies all the way down to substantiation cases for individual income tax returns.
While the odds of being audited are low and haven’t changed for years, the IRS audit is a serious matter and very well could and may end up with you owing more money.
Can You Win an IRS Audit?
One of the main questions we get is whether you can win an IRS audit. The answer is “yes!” You certainly can. A “win” may include getting a no-change letter from the IRS or even a refund check from the IRS. In other cases, a “win” may include minimizing known or expected adjustments.
Do I Need a Lawyer for an IRS Audit?
Another common question is whether you need a lawyer for an IRS audit. The answer is “it depends.” This is often a financial decision. One way to think about it is by looking at what you have at risk.
If you have any item on your tax return that the IRS could or is likely to adjust, what would the tax bill be? If this is more than the amount of the cost of a tax attorney, then you may want to hire an IRS audit defense attorney to handle the audit.
You might also view it in terms of the value of your time and the stress of the audit. There are times when it makes sense to hire a tax attorney for an IRS audit to free up your time.
How Much Does IRS Audit Representation Cost?
There is no standard fee when it comes to IRS audits. What one tax attorney charges, may be higher or lower than another tax attorney.
Even then, some audits are more involved and require more work than others. This is why most IRS attorneys handle IRS audits on an hourly basis.
A smaller IRS audit may only cost a few thousand dollars. A larger IRS audit may cost considerably more.
There are other cases that are limited in scope. In these audits the attorney may only be your IRS audit guide and provide limited advice as the audit progresses.
We offer a free consultation and can provide an estimate based on your situation. Feel free to call us at (713) 909-4906 to schedule an appointment.
How Do I Fight an IRS Audit?
|Types of Tax Returns Audited
|Large Business and International (LB&I)
|Corporations with assets over $10 million, partnerships with more than 100 partners, international taxpayers, and certain high-wealth individuals
|Small Business/Self-Employed (SB/SE)
|Small businesses and self-employed individuals, including sole proprietors, partnerships, and S corporations, and estate tax audits
|Tax Exempt and Government Entities (TE/GE)
|Tax-exempt organizations, government entities, and employee benefit plans
|Wage and Investment (W&I)
|Individuals and families, including W-2 employees, small business owners, and those who receive Social Security benefits
Before hiring a tax attorney, you should pause to consider what it might look like if you “go it alone” on the audit. This raises the question of how you fight an IRS audit.
The answer to this question is a variable one. It largely depends on the type of IRS audit and auditor. Not all audits or auditors are the same. There are several different types of audits.
IRS audits are intended to verify that taxpayers have correctly reported their tax obligations. IRS agents are supposed to look for substantial compliance; however, not all IRS auditors follow this policy. Some auditors are out to say “no” just to say “no.”
As for the types of IRS audits, there are several different types of audits. This includes correspondence audits, office audits, field audits, and large case audits. We’ll group these into correspondence audits and field and large case audits.
Correspondence and office audits typically focus on itemized deductions for taxes, interest, charitable contributions, and medical expenses that were deducted. They may also involve withholding tax not remitted for contractors and business travel expenses. The IRS conducts these audits from several different service centers located throughout the U.S. You can read more about the IRS and its structure here. Many taxpayers opt to handle these audits themselves.
Field and large case audits focus on business income and expenses and are usually conducted at the taxpayer’s office. Most taxpayers opt to hire a tax professional to handle these audits.
What are the Steps in the IRS Audit Process?
Most audits start with a letter from the IRS asking the taxpayer to contact the IRS to schedule an opening conference.
The audit then focuses on information gathering. You can read more about the IRS’s information-gathering powers here.
Correspondence and office audits may not include an opening conference–so the IRS may skip straight to asking for specific information or answers. In some cases, the IRS may simply issue closing reports without conducting a full audit in these smaller cases–leaving it up to the taxpayer to note any disagreement with the IRS’s findings.
Managing the IRS Audit
There are a number of legal, procedural, policy, and other requirements that must be followed by the IRS and the taxpayer during the course of the audit. It is imperative that the taxpayer follow and/or enforce these rules or, as a matter of strategy, not follow or enforce some of the rules.
Most audits focus on large, unique, or questionable items reported on the tax return or items that are missing from the return. This usually includes checking to make sure you didn’t understate your taxable income and looking for problematic tax deductions, such as charitable contribution deductions.
In some cases, the audit may even be limited to a predetermined issue or issues or type of tax (such as withholding, excise, employment, estate and gift taxes). Here are some general tips for preparing for an IRS audit.
Before the IRS even contacts you about an audit, you should expect the IRS to have already performed some preliminary investigations. This usually includes performing an Accurint search. Accurint is a third party service that is provided to the IRS. It is searchable and produces a report that is very similar to a credit report. Instead of reporting credit accounts, it lists bank accounts, real estate, business entities, etc. that are known to be owned by the person searched for. The IRS Audit Techniques Guide for attorneys (i.e., instructions for how the IRS is to audit attorneys) describes Accurint as follows:
An Accurint asset search can provide information on motor vehicles, property assessments, property deeds, watercraft and aircraft. Asset
searches may also disclose property ownership, purchases, and sales information that would not appear on a taxpayer’s return that may be
discussed during the initial interview. …. Care should be taken to review parcel numbers, registration numbers, and other identifying information to eliminate duplicate information. An Accurint search of the specific assets should be performed for identified assets.
Knowing that the IRS is likely to search this source, you might want to do so yourself to see what is there.
The IRS process will likely drag out for some time. In fact, the IRS will likely be so slow that it will have to ask you to sign a waiver to extend the time limit for the IRS to audit. It may even ask you to do this for several consecutive periods.
Closing the IRS Audit
The IRS audit concludes with the issuance of a revenue agent’s report (with a 30-day or 90-day letter) or a no change letter (or, in the case of a refund claim that is being audited, a claim allowance, disallowance, or partial disallowance letter).
The IRS may ask you to sign a waiver agreeing to its proposed adjustments or determination. You should be very wary of signing these waivers without first discussing the matter with a tax attorney. There have been instances where taxpayers did not know or understand what they were singing and they ended up losing their rights.
The IRS 30-day letter generally affords the taxpayer administrative appeal rights. The IRS 90-day letter (which is also called a Statutory Notice of Deficiency) requires the taxpayer to file a tax court petition, at which time the IRS will normally forward the case to the IRS Office of Appeals for consideration.
The good news is that the IRS rarely comes back and audits taxpayers after it has closed the audit. But there are instances when it does. There is one reported case where the IRS audited the taxpayer five times in a ten-year period. Ouch.
What if I Disagree with the IRS Auditor?
If the IRS audit proposes additional tax or penalties, the taxpayer will often have the ability to appeal the decision. You may also be able to ask to participate in the IRS’s Fast Track Settlement Program.
The IRS Office of Appeals handles these cases–both traditional appeals and fast-track settlement cases. IRS Appeals hears a number of different types of tax controversies, but it does not address them all. There are certain tax controversies that are IRS decisions that IRS Appeals will not consider.
The IRS Office of Appeals is focused on settling cases. A very high percentage of tax disputes are settled in appeals.
But it is rare for appeals to allow everything the taxpayer is asking for.
Appeals officers consider the merits of cases through the lens of the hazards of litigation. This is best described as the odds the taxpayer would prevail if they were to go on and litigate the case. Appeals officers are tasked with coming up with a settlement range based on the hazards of litigation. This is usually somewhere between 20% to 80% of the IRS auditor’s adjustments.
The appeals case may be settled with an informal settlement, an IRS closing agreement, or with no agreement.
Get Help With Your IRS Audit
There is no substitute for experience in conducting and managing audits. This is not an area for novices or others who do not handle audits regularly.
An experienced tax attorney who regularly handles audits should be engaged to handle the audit.
We help taxpayers with IRS audits. Please call us at (713) 909-4906 to discuss your IRS audit or appeal with our tax attorneys.