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Houston IRS Audit & Appeals Attorneys

You probably found us by searching for “IRS audit attorney,” “tax audit lawyer,” or “Houston IRS appeals attorney.” You are in the right place. Mitchell Tax Law is a Houston tax law firm that represents individuals, business owners, and closely held companies in IRS audits and IRS appeals. We step in early, take over the conversation with the revenue agent, and work the case toward the smallest defensible adjustment.

An audit notice is not a verdict. It is the opening move in a structured process with deadlines, rules, and real leverage points. Most audits we see are won or lost based on what happens in the first thirty days — what gets produced, what gets said, and what stays out of the file. The pages below explain how IRS exams and appeals actually work and how we approach them for Houston clients.

Why the IRS picks a return for audit

The IRS does not audit returns at random. Most exams start with the Discriminant Inventory Function score, which flags returns whose deductions, losses, or ratios look unusual against statistical norms. Others come from third-party document matching — W-2s, 1099s, K-1s, and 1098s that do not line up with what the return reports. The odds of being audited are still low overall, but they are not low for every taxpayer. High income, large Schedule C losses, cash businesses, foreign accounts, partnerships with unusual allocations, and large charitable contributions all raise the score.

Information returns are a particular trap. If you never received a Form 1099, the IRS still has it, and the matching program will eventually find the mismatch. The same is true for K-1s issued late or to the wrong address. Related-party transactions, large round-number deductions, and credit-card-to-cash estimation method reconstructions are other common triggers.

The kinds of IRS audits we handle

Not every audit looks the same. The simplest is the correspondence audit — a letter asking you to substantiate one or two items by mail. Office audits bring you to an IRS office to discuss several items. Field audits send a revenue agent into your business or your accountant’s office and tend to cover the whole return. Each has its own rhythm, and we adjust our approach to fit.

We also handle specialty exams. Partnership audits now run under the BBA centralized audit regime, where the partnership itself can be assessed unless a valid push-out election is made. The Tax Court recently struck down the IRS timeline for partnership adjustments, which matters for how aggressively to litigate procedural issues. Employment tax audits often turn on worker classification and on whether withholding tax was remitted for contractors. Estate and gift tax audits are their own world, with valuation reports and discount studies at the center.

What to do the moment you get an audit letter

The first call is the most important call. Before you produce a single document, get the file organized: original return, source documents, contemporaneous logs, board minutes, and any prior-year correspondence on the same issue. Preparing for an IRS audit is mostly about controlling the document flow — producing what is responsive, in the form requested, with nothing extra.

Two things matter most. First, do not volunteer. Providing information to the IRS can disclose additional tax due on issues the agent never asked about. Second, understand what the IRS can compel. The agent has real information-gathering powers through summons, third-party contacts, and reconstruction methods, but those powers have limits and procedures. We make the IRS use the right ones.

If you have already produced records that fall short on form — missing logs, late substantiation, or technical defects — the doctrine of substantial compliance can still salvage the deduction if the underlying purpose of the rule was met.

How the IRS auditor builds the case against you

Most IRS audit adjustments fall into two buckets: the agent will try to increase your taxable income or disallow your deductions. On the income side, expect indirect methods — bank deposits analysis, net worth analysis, the credit-card-to-cash method, and cash T-accounts. These methods can produce big numbers fast, and they often require rebuttal with the actual books rather than a denial.

On the deduction side, the agent looks at items that fail on substantiation. Charitable contribution substantiation rules are strict and unforgiving — a missing acknowledgment letter can kill an otherwise valid deduction. Business travel and vehicle expenses require contemporaneous records. Even business credit card interest can be challenged if the card is in the wrong name or the use is not properly tracked. Knowing where the agent will press lets us preempt the issue.

Statutes of limitations and Form 872 extensions

The IRS generally has three years from the filing of the return to assess additional tax. That stretches to six years for substantial omissions of income and is unlimited for fraud and for certain unfiled returns. The clock matters because it limits the agent. As the deadline approaches, the IRS will routinely ask you to sign Form 872 to extend the time limit for assessment. That request deserves real thought. Sometimes signing is the right move — sometimes the right move is to let the clock force the agent’s hand.

Some categories of tax have their own rules. There is no unlimited time limit for IRS withholding tax simply because the IRS labels something a withholding issue — and that argument matters in employment tax audits and information-reporting penalty cases.

Closing the exam: agreed, unagreed, and the 30-day letter

Most audits end one of three ways. The cleanest is a no-change letter. The next is an agreed report — the taxpayer signs Form 4549 and the case closes. The third is an unagreed report, which triggers a 30-day letter and the right to take the case to IRS Office of Appeals before the deficiency is assessed. Getting adjustments agreed at audit can save real money, but signing too early gives up rights you may want later.

When the IRS is wrong, fee-shifting is available. A tax attorney can recover attorney’s fees from the IRS in the right case, and getting the IRS to pay for your tax attorney is sometimes the leverage that drives a fair settlement.

The 90-day letter (Notice of Deficiency) and Tax Court petition

If the case is not resolved at exam or Appeals, the IRS issues a statutory Notice of Deficiency — the 90-day letter. That notice opens a strict 90-day window to file a petition in the U.S. Tax Court. Miss the window and the deficiency is assessed and the only path left is to pay and sue for refund in district court or Court of Federal Claims. The petition itself is short, but the choice to file it is the most important strategic decision in the case.

Notices of Deficiency also have to be valid. They have to come from someone with authority and be properly signed. Whether the IRS’s automated system can issue a valid Notice of Deficiency is a live question and one we look at on every case.

IRS Appeals: how it really works

The IRS Office of Appeals is independent of the exam function and is supposed to settle cases based on the hazards of litigation. In practice, that means the Appeals officer weighs how likely the IRS is to win in court, discounts the proposed adjustment accordingly, and works toward a number both sides can live with. The Appeals stage is where most audit disputes actually end.

Appeals procedures have changed in recent years. The new IRS appeals procedures for tax controversies restrict what Appeals will and will not consider, especially around new arguments and new evidence. There is also a trap built into the system: an offer of IRS Appeals review can preclude later judicial review of certain collection matters, so the decision to accept an Appeals conference has to be made with the litigation path in mind.

For the right case, the IRS Fast Track Settlement Program can resolve the dispute in 60 to 120 days using an Appeals officer as a mediator while the case is still at exam. Fast Track is not right for every case, but when it fits it saves months of process.

Audit reconsideration and IRS closing agreements

Some clients come to us after the audit has already closed against them — a default assessment, a missed Tax Court petition deadline, or a representative who agreed to adjustments the taxpayer should not have agreed to. In the right case, an audit reconsideration request can reopen the issue and undo the assessment. The request has to be focused, well-documented, and procedurally clean.

On the other side of the spectrum, sometimes the goal is to end the dispute permanently — for the year audited and for related years — through an IRS closing agreement. A closing agreement gives finality both sides can rely on. It is the right tool when the issue is large, recurring, or likely to be raised again.

Penalties, interest, and the rest of the bill

An IRS audit almost always proposes penalties along with the tax — accuracy-related penalty, substantial understatement, negligence, and in worse cases the civil fraud penalty. Each has its own elements and defenses, and each can be reduced or removed on the right facts. For deeper coverage of these defenses and the abatement process, see our IRS penalty removal page. Interest follows the tax and the penalty by statute and is rarely abatable, but it is computable, and we check the math.

How we work with Houston audit clients

Audit work is attorney work at our firm. The same Houston tax attorney who scopes the engagement reads the exam file, drafts the responses, and sits across from the revenue agent or the Appeals officer. You are not handed off to a paralegal or a junior associate. We give a written scope and a fee estimate up front, and we keep you in the loop on every IRS contact.

We also tell you when an audit is not worth fighting. Sometimes the right answer is to agree, pay, and move on. Sometimes the right answer is to fight at Appeals and stop there. Sometimes the right answer is the Tax Court. Our job is to tell you which is which on your facts, and then to do the work.

We help taxpayers with IRS audits. Please call us at (713) 909-4906 to discuss your IRS audit or appeal with our tax attorneys.