Tax Audits

We Help With IRS & State Audits & Appeals

IRS audits and state audits are intended to be used by the government to verify that taxpayers have correctly reported their tax obligations.

The type of audit varies based on the size and complexity of the potential tax issues and the taxpayer. There are several different types of audits, including correspondence audits, office audits, field audits, and large case audits.

Types of IRS Audits

Correspondence and office audits typically focus on itemized deductions for taxes, interest, charitable contributions, and medical expenses that were deducted. The IRS conducts these audits from several different service centers located throughout the U.S.

Field and large case audits focus on business income and expenses and are usually conducted at the taxpayer’s home or office.

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 and 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).

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. 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).

The IRS audit closes with the issuance of a revenue agents report proposing adjustments or a no-change letter proposing no adjustments. If the IRS audit involved a refund claim, the audit may close with a claim allowance, partial allowance, or dis-allowance letter.

IRS Appeals

If the IRS audit proposes additional tax or penalties, the taxpayer will often have the ability to appeal the decision. The IRS Office of Appeals handles these cases.

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 considers 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.

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.

Please call us at (713) 909-4906 or contact us online to schedule an appointment.

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