Tax Audit Details
No one ever said that hearing from the IRS was good news; it usually is not good news. In fact, it can often be bad news. It is frightening to open the letter and discover that you’ve been selected for an IRS tax audit. But here’s an important thing to keep in mind: most IRS tax audits and most criminal investigations never go anywhere unless you say something you shouldn’t have said. Or unless you turn over records your lawyer should have reviewed first. Know this: don’t speak to these people and don’t turn over records without first talking to us. Please, don’t even set an interview date with them until you have talked to me, John Ellsworth. For 37 years I have been a tax lawyer. For 37 years I have defended tax audits and I have seen all the ways an innocent-looking audit can get difficult fast.
If an IRS tax audit is begun, call me and I’ll speak to the IRS for you. After all, with the IRS you are guilty until proven innocent. Example: a Revenue Agent will disallow your deductions unless you can prove them with receipts. Never mind that documentation can always be provided, with my help. Another example: the Revenue Agent will add up all your bank deposits for the year and claim that’s how much income you had. Never mind that part of the deposits came from savings or cash advances. That’s why you need a tough tax audit lawyer like me to defend your tax audit and prove income and deductions for you. This way you can prove your innocence and that’s actually what it takes in an IRS tax audit.
How should the taxpayer prepare for an audit when that letter comes?
These tips will point you in the right direction:
- Retain the services of a tax audit lawyer. Enrolled agents, tax attorneys or CPA’s may represent you at an audit. They are trained in IRS procedure and can represent you much better than you can represent yourself. To a non-lawyer, however, reading the tax code is like reading a foreign language. If you want the best, get the very best the United States has to offer: the tax audit attorney.
- Second, let me do you talking for you. I am a tax lawyer with a lot more years of defending tax audits than you. I will appear at the interview for you. I will appear at the audit and you will not even be there.
- Keep good records. Believe it or not, maintaining good tax records is more than just getting things in order a month before April 15 and running out and buying TurboTax. You must learn to keep in proper file folders in a proper filing system the proof of what you put on your tax return. So you keep bank statements and deposit slips. You keep your checks and attach them to the invoices they paid. You keep your credit card list of purchases. Then, if you’re called in for an audit, you’re prepared. The “proof records” you keep are important, producible evidence of what you put on your tax return. TurboTax is a good program, but without the supporting evidence it alone is inadequate to get you through an IRS tax audit. Keep your backup information for three tax years because the IRS audits can go back three tax years.
- If you’re caught without records, here’s what we help you do. Think back to that year. Remember bank accounts and credit cards. List your major purchases. Go to your pharmacy and get a copy of all drugs purchased and the price you paid for that tax year. Get bank records (yes, they’ll cost a little, but far less than an audit has the potential to cost you). If you’ve claimed expenses like medical expenses, it’s possible that your doctor or hospital will still have those medical records on file. Don’t hesitate to call them. You can also call your employer and ask for duplicate W-2s or 1099 forms; or check with your mortgage company for interest expenses for that year; or with your county for personal property taxes paid. Now we will put it all into order for you, in the format the IRS requires. Our document staff will then get the records to the IRS for you or I will take the records to the audit for you.
- Do your homework. My website has tremendously useful tools in the form of articles that you can easily browse and read. You’ll be amazed how much you can learn about automobile deductions just by reading one article. Home office? Read the publication about home offices. Do your investigation and there’s no reason why you cannot know as much about the rules in your case as the auditor knows.
When I attend the interview, I’m going in as your hired cash guard. I will volunteer no information beyond what is asked. I will take along no more documents than what the IRS has requested. If you decide to go it alone (which I do NOT recommend!) remember that your demeanor means everything. Be professional. Try not to argue or insist. Don’t ridicule and above all, don’t belittle. Be on time, have your documents organized and copied, and take the audit seriously.
About the roles in your audit case. First and always remember the auditor is not on your side. He or she may seem to be on your side, or at least pulling for you, but they are not. They are pulling for their employer – the IRS – and they are pulling for their own job performance. Second, you are guilty until and unless you can prove your innocence. You have probably lied or made things up or why else would you be here in the first place? That’s their attitude. Again, I will appear for you and I will calmly and politely answer questions but I will never ever volunteer information on the notion that it may help. It won’t help. The IRS is schooled in letting long pauses develop during which they expect the lay person to blurt out information. I won’t do that because I’m a tax lawyer and I know better.
When we at Ellsworth Law Group defend an audit we consider it a win when we have proven the tax return was accurate and complete as filed. No additional tax due is a win. When we prove extra items in our client’s favor and get money back, that’s an even better result.
We’re serious. There are many audits that prove the IRS actually owes you instead of the other way around.
So how is all this done? In three words: records, records, records. Seriously consider hiring a tax lawyer to make sure you have everything in the best possible posture for presentation. We can help produce documentation where you often just don’t know what to do. Our services, and what you pay for our services, will pay off in the long run. Play to win. Know the rules. Document everything. Give us a call and we’ll help you get started today. Nothing makes the fear go away faster than good old-fashioned preparation.