Call 512-659-3179
For Free Consultation
support@sageInvestigations.com

Call 512-659-3179
For Free Consultation
support@sageInvestigations.com

We read in the newspaper that the number of audits is down to less than 1%.  In the Kiplinger article dated April 30, 2014, the Commissioner of the Internal Revenue Service (IRS) advised the agency will perform 100,000 or fewer audits this year.  The odds are reassuring that the vast majority of tax returns will skate through the IRS centers. Although the odds are against being audited, audits can and do occur. The better prepared you are for an audit the better the process will be. The experienced officers at Sage Investigations offer the information in this article to help you prepare.

There are three types of audits: correspondence audits, office audits and audits by field agents. These audits may relate to income deficiencies or expenditure substantiation and can involve two or three years of tax returns. The civil statue allows three years of returns to be reviewed and the burden of proof is on the taxpayer, whereas the criminal statute generally allows six years to be review and the burden of proof is on the IRS.

To be successful when audited, gather your records and be responsive to the request for documents of the auditor. You may elect to either represent yourself, have an authorized representative accompany you, or send the representative in your stead with your records and explanations. If you elect to attend the audit you should attempt to gather credibility from the outset and be cordial but firm in your manner. Strive to appear calm, and do not engage in casual banter. The auditor is not your old college friend; he or she has a specific purpose and a goal in mind. It may be helpful to bring an adviser, CPA, or Enrolled Agent with you to help establish a professional tone for the meeting. The presence of your attorney will make the auditor take interest immediately.

At the end of the audit with all substantiation considered you may either agree with the findings or appeal to the auditor’s supervisor. There are further appeals beyond that. Most likely you will need assistance from an attorney, CPA or Enrolled Agent as the appeals process moves forward. 

If you have been audited over multiple years for the same issues that generate substantial tax revenue, and the auditor concludes that there are badges of fraud, he or she may refer the case to the Criminal Investigation section. If accepted, the field agent and a Special Agent will contact you and attempt to interview you. If you have a Power of Attorney (POA) on file with the IRS your POA will likely be contacted before you are. If you are contacted directly the Special Agent will read you your non-custodial rights and attempt an interview. You should respectfully defer at that point and advise that you want to talk to a lawyer before moving forward. The Special Agent will then proceed with his or her investigation and begin contacting third parties (return preparers, employers, banks, etc.) to develop the case.

Throughout the investigation the Special Agent will have access to any and all records provided during the audit and will generally issue summons for third party records. In some cases, the Special Agent elevates the case to a Grand Jury level and issues grand jury subpoenas to gather testimony and documents. Regardless, you may find yourself in deep trouble as a result of a simple audit. Audits can be dangerous for taxpayers who challenge the IRS, so take care to file correct returns or be prepared to bear the expense of paying for a team to defend you.  

Sage Investigations knows the ins and outs of the IRS due to our Principal being an IRS Special Agent for 26 plus years. If you are being audited, don’t come up against the IRS alone. Call Sage Investigations at (512) 659-3179 and let our experience work for you.