IRS tax audits have a reputation for being meticulous – and for good reason. When the Internal Revenue Service examines a tax return, it can, and often does, dig deep into nearly every aspect of a taxpayer’s financial life. From bank accounts to business ledgers, contracts to travel logs, an IRS audit leaves little unexamined. Understanding how thorough IRS audits are is critical if you’re a taxpayer concerned about facing one. At the Tax Law Offices of David W. Klasing, our dual-licensed IRS Tax Audit Attorneys and CPA will help you understand precisely what to expect from a high-risk IRS audit process and why experienced legal representation is indispensable to protect your rights, finances, and even your freedom.
If you’re facing an IRS audit or worried about one, arm yourself with knowledge – and strong legal counsel. A high-risk IRS tax audit can escalate quickly from a simple inquiry about a deduction into a multi-year examination or, exponentially worse, a criminal tax investigation leading to criminal tax prosecution. As detailed below, IRS auditors are highly trained and now bolstered by advanced technology, artificial intelligence (AI), and data analytics, enabling them to scrutinize returns with unprecedented thoroughness. By the end of this guide, you’ll see why handling an IRS audit alone, or with the original tax preparer, is a risky proposition. A litigation-ready approach – treating every audit as if it might end up in court – is often the best way to protect your interests.
How the IRS Selects Taxpayers for Audit
The IRS reviews hundreds of millions of tax returns each year, but only a small percentage are audited. Tax Audits are not arbitrary; returns are usually selected because something stands out. Here are the main ways the IRS flags returns for possible audit:
Automated Scoring (DIF System)
The IRS uses a computer algorithm known as the Discriminant Index Function (DIF) to score every tax return on the likelihood of errors or underreporting. The exact formula is secret, but it’s based on historical data and patterns from past audits. A high DIF score means your return has unusual or inconsistent information – perhaps much higher deductions than others in your income bracket or other anomalies. High-DIF returns get flagged for further review by IRS examiners, and if an agent agrees something looks fishy, an audit will be initiated. In short, if your return deviates significantly from the norm, the IRS’s computers will notice.
Random Selection
Not all audits are triggered by a specific issue. The IRS conducts a small number of random audits as part of compliance studies and to improve its algorithms. Think of these as the IRS performing a “check-up” on a statistically chosen sample of returns. While the odds of a random audit are low, they do happen – even perfectly honest returns can be picked simply by chance.
Data Matching & Third-Party Reports
The IRS’s automated systems cross-check the income, deductions, and credits on your return against information from third parties. Every W-2 from your employer, 1099 from clients or banks, and 1098 mortgage interest statement is also sent to the IRS. If what you reported doesn’t match what these third parties reported, the system will flag your return. For example, if a Form 1099 shows you earned $50,000 as an independent contractor, but you only reported $30,000, expect the IRS to notice. Simple errors (like forgetting a form) or omissions of income are common audit triggers. In an age of Big Data, the IRS can easily compare every number on your return against its vast information databases – inconsistencies stick out like a sore thumb.
Whistleblower Tips
The IRS has a Whistleblower Office that rewards people who report tax fraud. Tips from disgruntled ex-employees, business partners, or others can prompt an audit or even a full criminal tax investigation. For instance, a former bookkeeper might tip off the IRS that a business owner has been skimming cash or that certain income wasn’t reported. The IRS evaluates credible tips and, if they have merit, may open an audit based on the information provided. Whistleblower tips are a significant source of leads for complex tax evasion cases.
High-Income and High-Wealth Taxpayers
By policy, the IRS focuses enforcement resources on areas where it expects the most non-compliance and the most significant revenue impact. Wealthy individuals, large corporations, and partnerships are thus far more likely to be audited than the average worker. In fact, recent IRS initiatives, funded by Congress, specifically target high earners (those with an income of over $1 million) and those with substantial tax debts. The IRS has publicly stated it is shifting attention to complex returns and wealthy filers using new staffing and technology – and that ordinary wage earners under $400k should not see increased audit rates. High-income taxpayers often have more complicated tax situations (businesses, investments, trusts, overseas accounts, cryptocurrency, etc.), which provide more opportunities for error or evasion. Auditing these returns can yield a high payoff for the IRS, so they get extra scrutiny. For similar reasons, the IRS is ramping up audits of large partnerships and private equity funds, utilizing AI tools to unravel complex partnership structures that may conceal income.
Common Red Flags (“Badges of Fraud”)
Certain patterns or claims on a return reliably draw auditor attention. For example, large round-number deductions (e.g., exactly $10,000 in charitable donations), unusually high business expenses relative to income, or consistently reporting losses year after year can all trigger an audit. Claiming deductions that are out-of-line with your income level or profession – like a schoolteacher writing off $30,000 of business travel – is asking for an audit. Running a “hobby” activity and deducting losses (e.g., a side business that never makes money) is another classic red flag. With today’s data analytics, the IRS compares your return to norms for similar taxpayers; anything far outside the norm may be flagged for a closer look. Unreported income is also a huge no-no: the IRS’s computers will match all income forms, and missing income (including new forms like crypto transaction reports) is a top audit trigger. In summary, the more your return looks irregular, the more likely the IRS will want to “verify” it via an audit.
It’s worth noting that intentionally fudging numbers on your tax return is almost guaranteed to backfire. The IRS uses sophisticated software to scan returns, income records, and even spending habits for anomalies that indicate tax fraud. In other words, the IRS is getting exceedingly good at sniffing out irregularities – even subtle ones – especially with enhanced funding and new technology. Always assume that Big Brother (in this case, the IRS) can and will check your figures.
How Deep Can an IRS Audit Go?
The IRS has broad powers to obtain information and uses a variety of tactics – some straightforward, some highly sophisticated – to examine your financial affairs. Here are some ways an IRS audit can delve deeply into your records and life:
Comprehensive Document Review
An IRS auditor can request any records that are relevant to your tax return. This isn’t limited to the receipts or logs you conscientiously kept; it can include bank statements, credit card statements, canceled checks, loan documents, leases, contracts, emails, correspondence related to financial transactions, and more. For example, if you claimed business travel expenses, the IRS might ask for travel logs, tickets, and your calendar to confirm the travel was for work. If you deducted a home office, they can request utility bills and even photos or a diagram of your home’s layout to verify the office space. There is basically no document too granular – if it could impact your income or deductions, the auditor can ask for it. If you fail to produce requested records, the IRS can assume the worst (e.g., disallow the deduction or treat an undeclared bank deposit as income). It’s not uncommon for an audit to feel like a full-on audit of your lifestyle – agents may probe into how you afford your rent or mortgage, what tuition you’re paying for your kids or other personal expenses, all to see if your reported income supports it. This can feel invasive, but it’s within the IRS’s discretionary power if those answers could reveal unreported income.
Information Document Requests and Summonses
At the start of an audit (and throughout), the IRS will issue Information Document Requests (IDRs) listing what information or documents you must provide. These are essentially formal letters asking for specific items by a deadline. If you don’t comply or fully respond, the IRS has teeth: they can issue an administrative summons. An IRS summons is a legally enforceable order demanding documents or testimony from you or even third parties. For instance, the IRS can summon your bank for copies of your account statements if you fail to provide them. They can summon third party businesses to provide invoices or payment records related to you. They can even summon associates or family members if relevant. In a recent 2023 Supreme Court case (Polselli v. IRS), the Court confirmed the IRS can obtain bank records of third parties without notifying them if those records are deemed relevant to collecting someone’s tax liability. That illustrates how far the IRS can reach: banks, employers, and others generally must comply with IRS summonses, and often, you won’t know what the IRS has obtained behind the scenes. This power to gather information secretly (when justified) underscores that an IRS audit is not just a polite request – it’s an investigation with legal authority. Bottom line: if records exist, the IRS can likely get them. Stonewalling or hiding documents usually backfires, as the IRS will either assume the worst or find another way to get the data.
Pro Tip: in a standard civil audit the IRS must disclose all information it has summoned. One sure sign that you’re under criminal tax investigation is when they are not informing you of who or what is being summoned.
Interviews and Questions
An IRS auditor will often attempt to interview the taxpayer (and in business audits, possibly bookkeepers or employees). These interviews can be critical. The agent will ask probing questions about how you prepared your return, sources of income, methods of record-keeping, and any specific items under review. They may even ask seemingly casual questions about your personal life or business operations. Make no mistake: the agent is trained to listen for inconsistent or incriminating answers. For example, if you mention that you “sometimes get paid in cash,” expect the following question to be about how you accounted for that cash on your return. Or if, during chit-chat, you reveal you have a side gig that wasn’t on the tax return, you’ve just opened a can of worms. Everything you say can be used in the audit. Many criminal tax cases have been initiated by a taxpayer speaking too freely during an audit interview. You have the right to decline or defer an interview or to insist that your attorney be present. In fact, our office often tries to preempt client interviews altogether – because you cannot accidentally incriminate yourself if you don’t talk in the first place. If an interview does occur, we thoroughly prepare our client on what to expect and how to answer honestly but narrowly. We often interject or rephrase questions to protect our clients. IRS agents are trained to be friendly and put a taxpayer at ease but remember that their job is to identify discrepancies. They might already suspect underreporting and be testing your responses. Don’t underestimate the thoroughness of IRS interviews – they can feel like interrogations. Having experienced tax audit defense counsel to manage this process is invaluable.
Bank Account Analysis (Forensic Accounting)
One of the IRS’s most powerful techniques is the bank deposit analysis. All an IRS agent needs to do is add up all deposits to all bank accounts you control, subtract any known non-taxable sources (like transfers between your accounts), and compare the total to your reported income. If you can’t account for a significant difference, that difference is presumed to be unreported income – and it only takes as little as about $10,000 of unexplained income for the IRS to start considering pursing a tax fraud case. Think about that: every check, every electronic deposit, every cash deposit to your accounts – the IRS will likely see them (either from you providing bank statements or via summons) and will ask you to explain any that weren’t obviously reported on your return. If you have, say, $50,000 of bank deposits beyond what your tax return shows as income, you had better be able to demonstrate those deposits were non-taxable (e.g., a loan, a gift, or transfers between accounts). Otherwise, the IRS will assert you underreported $50k of income. This method is exceedingly thorough because very few people can hide bank deposits. Similarly, the IRS might perform a cash T analysis (comparing your cash expenditures to known income) or a net worth analysis (seeing if your assets grew more than your reported income would allow). These indirect methods are standard forensic accounting tools in more complex audits. The IRS essentially reconstructs your financial picture to see if everything lines up. Every expense you claim is also examined: An auditor will treat each deduction as a personal (non-deductible) expense unless you can prove it’s an “ordinary and necessary” business expense supported with proper records. For example, if you deducted $20,000 in meals and entertainment, the IRS will expect to see receipts and logs of who you met, where, and the business purpose. If you can’t produce them, that deduction will be denied – and you might get hit with a 20% accuracy penalty or worse for negligence. In sum, IRS audits are thorough because they systematically analyze both inflows (income) and outflows (expenses). They leave you to prove the legitimacy of anything not matching up. It’s an exhaustive approach that often uncovers issues that taxpayers themselves have forgotten about.
Advanced Data Analytics and AI Tools
In recent years, the IRS has increasingly adopted technology to enhance audit targeting and examination. Thanks to a significant funding boost, the IRS is deploying artificial intelligence to sift through vast datasets and identify potential tax evasion or errors. For example, the IRS has announced that it is using AI to detect better complex partnership schemes and spot high-volume cryptocurrency transactions that may indicate unreported income. These tools can connect the dots in ways a human might miss. The IRS can feed in public information – press releases, social media posts, property records, luxury purchases – and let algorithms flag taxpayers whose lifestyle or assets don’t square with their reported income. It’s not science fiction; if you’re flaunting a new yacht on Instagram while reporting a modest income, don’t be surprised if that becomes audit fodder. Internally, the IRS also uses machine learning to refine its audit selection (as discussed with DIF scores) and even during audits to identify transactions of interest. For taxpayers, the impact of these tools is a more targeted and thorough audit. The IRS is less and less likely to waste time on “no-change” audits (where everything is fine) because analytics help them pick returns that likely have problems. When you are audited, you can bet the IRS might already have analyzed your financial ecosystem with a fine-toothed comb – including data you didn’t realize they had. This means two things: (1) Always assume the IRS either knows or can find out the truth, and (2) if you do have something problematic in your returns, you especially need skilled representation to navigate the minefield. The IRS’s technological edge is one reason audits should not be taken lightly – they have more information and insight at their fingertips than ever before.
Risk of Audit Expansion and Criminal Tax Referral
One of the most alarming aspects of an IRS audit is how quickly it can expand beyond its initial scope. What starts as a question about one year’s tax return can grow to include multiple years, and a purely civil tax audit can turn into an exponentially worse and life-changing criminal tax investigation if the agents suspect willful tax fraud. This escalation risk is a key reason to approach audits with great care.
Expansion to Other Years or Issues
When auditors find discrepancies in one year, they often won’t stop there. It’s routine for the IRS to open or expand audits to adjacent tax years if a pattern of issues is suspected. For instance, if you’re being audited for 2023 and the agent finds unsubstantiated deductions, they might decide to audit 2024 and 2022 as well, figuring you likely made similar claims in those years. They can also broaden the scope within the same year – maybe the audit began focused on your business income, but then the agent notices large charitable donations and decides to verify those, too. There’s a domino effect: one adjustment leads the auditor to question other items. Anything on the return is fair game once you’re under audit. That said, a skilled dual-licensed Tax Attorney & CPA can often negotiate or argue to limit the scope. At the tax law offices of David W. Klasing, part of our audit defense strategy is to proactively address the IRS’s questions in a way that satisfies their concerns for the calendar tax year under audit without volunteering information that invites a broader fishing expedition. We also work to limit the years under audit – for example, if the IRS agent hints at looking at other years, we might argue there’s no need because we have evidence the issue was a one-time mistake. This is delicate work but not futile: with the right approach, we can often keep an audit focused on precisely what was initially requested. On your own, or with a less educated and experienced representative, you may not recognize when you’re saying or showing something that encourages the IRS to dig into other areas. That’s another reason having representation is essential – to compartmentalize the audit strategically.
Badges of Fraud and the Fraud Referral Process
The IRS uses the term “badges of fraud” to describe signs that a taxpayer’s misreporting might be intentional (fraudulent) rather than accidental. Examples include items such as two sets of books, altered invoices, fake deductions, unreported income that was clearly received, offshore accounts used to conceal money, cash transactions structured to avoid reporting, and so on. If, during an audit, the examiner begins to encounter signs of fraud, the situation becomes serious. The auditor is required by IRS procedure to handle potential tax fraud with care – they will usually consult with their manager and a Fraud Technical Advisor (FTA). Together, this team will decide whether to pursue the tax fraud angle. Often, they will begin a fraud development plan, quietly gathering evidence of intentional wrongdoing while still officially conducting a civil audit. If the evidence firms up (say the auditor finds clear proof of a fake deduction scheme or unreported cash income), then the IRS will stop the civil audit and make a formal criminal tax referral to IRS Criminal Investigation (CI). This is done using Form 2797, a referral report outlining the potential tax crimes. From that point, CI special agents (the IRS’s criminal tax investigators) take over, and the matter is no longer just about adjusting your taxes – it’s about potential prosecution for tax evasion, filing false returns, or other felonies. It’s important to realize that you might not know immediately if your audit has gone criminal. The IRS will not announce, “We think you committed fraud, so we’re investigating you now.” They typically halt the audit under some pretext, and you might only find out when CI contacts you (which could be weeks or months later, sometimes by surprise visit or by letter). However, there are warning signs: the auditor may become unusually quiet or stop asking for information, or they might ask something that clearly hints at criminal tax conduct (like “Who prepared these invoices?” when they suspect they’re fake). At that point, if you haven’t already, you must get an experienced dual-licensed tax defense Attorney & CPA immediately. Never, ever lie to an auditor or agent – lying to a federal agent is itself a crime (a felony that can carry up to 3 years in prison and heavy fines). If you fear the truth is incriminating, you have the right to remain silent (Fifth Amendment) to avoid self-incrimination, and that’s where your attorney can communicate on your behalf.
At the tax law offices of David W. Klasing, we have guided many clients through so-called “eggshell audits,” where we know there is a potential criminal tax issue (the taxpayer did make a willful mistake in the past), but the IRS civil auditor does not yet know. Handling an eggshell audit is walking on eggshells indeed – one misstep can crack the case open for CI. Our job in those scenarios is to fulfill your legal obligations to the audit without volunteering anything that would expose the tax fraud. It’s a tightrope, but with experienced counsel, it can be navigated successfully. We’ve have tons of experience with successfully navigated eggshell audits, where numerous clients came out with just civil adjustments and no criminal tax exposure, by carefully managing information and sometimes negotiating a closing agreement before things went off the rails.
Civil vs. Criminal Outcomes
In the vast majority of income tax audits, the outcome is civil – meaning you either owe additional tax (and perhaps penalties) or you don’t. If you owe, the IRS will issue a report (exam adjustment) and a bill, which you can then pay or appeal. Civil tax penalties for audit findings can be substantial: commonly a 20% accuracy-related penalty for negligence or substantial understatements, or up to 75% if the IRS asserts the civil fraud penalty (used when they believe fraud occurred but perhaps they choose not to go criminal). Interest is also added. These bills can add up to tens or hundreds of thousands of dollars for significant adjustments. In rare cases, an audit leads to a no-change (the IRS accepts everything as filed) – that’s the best outcome, but it’s relatively uncommon unless you were extremely well-prepared and the IRS’s concerns were unfounded.
On the other hand, if the case goes criminal, now we’re talking about prosecution by the Department of Justice. Tax crimes like tax evasion (IRC §7201) or filing false returns (IRC §7206) carry potential prison time (up to 5 years per count for evasion, 3 years for false returns) and massive fines, not to mention the cost of criminal defense and the personal toll of being a defendant. Even an investigation alone – before any charges are filed – means CID agents could be interviewing witnesses, summoning more records, and perhaps executing search warrants. It’s a nightmare scenario for any taxpayer. And it often starts innocently – with an audit letter about a single tax return. This is why our dual-licensed Tax Attorneys and CPAs treat tax audits with the utmost gravity. Even if you have nothing to hide, you don’t want a tax audit to spiral out of control due to misunderstandings. If there is something to hide, you need a strategy to address it (such as IRS voluntary disclosure practice before the audit, if possible, or careful navigation if the audit has already begun).
A Final Note on Criminal Tax Exposure
Often, clients ask, “What dollar amount will get the IRS to pursue criminal tax charges?” There’s no hard rule, but a commonly cited figure is around $10,000 of unreported income – as little as that can trigger a closer look for fraud in an audit setting. Under the federal sentencing guidelines, a tax loss of $100,000 could potentially result in several years of prison if convicted, although every case varies. The IRS and federal prosecutors typically reserve criminal tax charges for the most egregious cases (willful, repetitive, or involving large sums or patterns of deceit). But remember, from the IRS’s perspective, every dollar of tax evaded is a dollar stolen from the U.S. Treasury. They take even “small dollar amount” fraud seriously, especially if it is deliberate. Therefore, any hint of fraud in an audit is dangerous territory.
Our philosophy is to keep income tax audits purely civil if at all humanly possible – that means if we see the beginnings of a tax fraud issue, we work swiftly to address the IRS’s concerns in a way that does not incriminate the client. Sometimes, the best approach is to agree to a civil settlement (pay some taxes and penalties) before things escalate further. Each situation is unique, but the overarching goal is: don’t let a high-risk IRS tax audit become a criminal case.
What The Tax Law Offices of David W. Klasing Will Do for You
By now, it should be clear that an IRS tax audit is no trivial matter. It is a legally driven, high-stakes examination where mistakes by the taxpayer can have serious repercussions. At the tax law offices of David W. Klasing, our dual-licensed Tax Attorneys and CPAs approach is both client-focused and litigation-ready, meaning we aim to protect the client’s immediate interests during the tax audit and also position the case firmly in the event of any future tax litigation or appeal. Here’s how seasoned legal representation makes a difference at every stage of an audit:
Audit Preparation and Strategy
The moment you receive an audit notice; our dual licensed Tax Attorneys & CPAs can step in to devise a strategy. We begin by analyzing what the IRS is targeting and reviewing your tax returns and accounting records. With decades of experience, including former auditing experience in public accounting, we can often anticipate what the IRS is truly after. This allows us to prepare responses and documentation in a way that addresses the IRS’s questions without inadvertently raising new issues. We’ll identify weak spots in your documentation and determine how to address them (for example, if a receipt is missing, can we find alternative proof or explain?). Going in with a plan can prevent a panicked, haphazard reply that might raise more questions. We essentially audit your return ourselves first, so we know what the IRS will see and ask. That means fewer surprises during the tax audit.
Managing Communication with the IRS:
Once you authorize an attorney (by filing a power of attorney, Form 2848), the IRS will communicate with us instead of you. This is a huge relief for most clients – you no longer have to field calls or letters from the IRS. More importantly, it lets us control the flow of information. IRS auditors are trained to extract information; we are trained to provide only the necessary information. For example, if an agent casually asks you a question that you’re not legally required to answer, you might accidentally spill something damaging. However, as your representatives, we maintain formal and on-point communication. We often insist that all questions be put in writing rather than discussed informally over the phone so that we can carefully craft accurate responses. We also keep a record of everything provided. This disciplined approach protects you. In essence, we act as a shield between you and the IRS. The auditor must go through us, which prevents intimidation and ensures that your rights are respected.
Keeping the Audit on Track
A key part of our job is to prevent tax audit overreach. As discussed, tax audits can expand if not checked. We make appropriate objections if the IRS asks for information that’s outside the scope or timeframe of the tax audit. While we cooperate with all reasonable requests, we are not afraid to push back if an auditor goes on a “fishing expedition.” For example, if you’re being audited for 2023 and the agent requests 2020 bank statements without providing an apparent reason, we will question the relevance. We know where the lines are – for instance, we know the IRS’s manual says they generally shouldn’t open another year without managerial approval, and we can hold them to their procedures. By managing the scope, we aim to limit the tax audit to what truly matters, which saves you from needless hassle and risk. Our firm’s track record in audit defense demonstrates that a firm yet respectful stance can prevent an audit from escalating into an open-ended tax investigation. Remember, the IRS has limited resources, too; if we demonstrate that we’re prepared to fight extraneous issues, the auditor often sticks to the core matters.
Technical Expertise (Tax Law and Accounting)
An audit is where tax law and accounting intersect. Our team’s dual qualifications shine here. Many audits involve complex tax laws or accounting rules. Perhaps the issue is whether a particular expense is truly deductible under tax law or how a transaction should be accounted for and recognized for tax purposes. A non-lawyer CPA might understand the numbers but not the nuanced legal interpretations; a non-CPA lawyer might know the law but not the accounting entries. As dual-licensed tax professionals, we speak both languages fluently. This means we can present sophisticated legal arguments and support them with the proper accounting evidence. For example, if the IRS claims income was unreported, we might use accounting reconstructions to prove that income was already accounted for or wasn’t actually taxable. If the IRS challenges a deduction, we cite the Tax Code, regulations, and court cases to argue why it’s allowable. This level of advocacy can significantly impact the outcome of a high-risk tax audit. The IRS auditor is not always correct – sometimes, they misapply the law or misunderstand the facts. We’ve had countless tax audits where we successfully defended a position and convinced the IRS to drop an issue simply because we knew the law & facts better than they did, and we presented a compelling case with documentation. In short, we level the playing field: the IRS has tax experts on their side, and with us, so do you.
Protecting You from Self-Incrimination
If there’s any hint of potential tax fraud, having an attorney is indispensable because of the attorney-client privilege. Communications with your tax attorney about your tax situation are confidential and cannot be used against you, which is not the case if you’re only working with a CPA. Only an attorney (or someone working under the direction of an attorney, like our staff of Kovel accountants) can offer true legal privilege. Our firm often works as a team – our in-house CPAs may crunch numbers, but always under the guidance of our attorneys so that the work is protected by privilege. If, during an audit, you need to make sensitive disclosures (for example, to correct prior misinformation or to come clean on an issue), we strategize how to do so without unnecessarily exposing you. Sometimes, that might involve doing a voluntary disclosure before the audit gets wind of the issue, which, when done correctly, can essentially inoculate you from criminal tax prosecution. These are complex decisions that should only be made with qualified legal advice. One thing is sure: if you have any reason to suspect the audit could uncover willful violations, do not go it alone. A personal CPA or tax preparer cannot shield your admissions – they could even be forced to testify about conversations with you. In contrast, we ensure that any soul-baring discussions happen under the protection of attorney-client privilege. We then decide on the best course to resolve the issue, whether that’s an amended return, a quiet disclosure, or negotiating a settlement. Our priority is keeping you out of criminal trouble while resolving the tax issues as favorably as possible.
Negotiating Settlements and Mitigating Penalties
Audits often end with a proposed tax increase. That’s not the end of the story. We routinely deal with IRS auditors (and their supervisors) to reduce the proposed tax and especially the penalties. If there were mistakes on your return, we might argue they were in good faith or due to reasonable cause to get penalties abated. If there’s room to interpret a grey area in your favor, we advocate for the interpretation that favors you. Sometimes, if the evidence is against us on a particular issue, we can negotiate a resolution across multiple topics, essentially a compromise where you concede something, and the IRS concedes something else. Because we approach cases with a tax litigation & tax appeals mindset, we’re always prepared to appeal or take the matter to the Tax Court if the auditor is being unreasonable. And the IRS knows this – a key advantage of having a known tax litigation attorney on your side is that the IRS may be more willing to settle at the audit level rather than risk a fight in court. Our firm’s reputation for zealous advocacy benefits our clients; we’re not afraid to say, “We don’t agree, and we will appeal.” Often, that prompts a more favorable re-examination by the auditor’s manager. We strive to either end the audit with no change or minimal liability or set the stage for a successful appeal. Even in cases of clear error on the taxpayer’s part, we focus on limiting the fallout – perhaps getting a non-fraud penalty instead of a fraud penalty or ensuring the IRS doesn’t extend to other years.
Litigation-Ready Defense
“Litigation-ready” means we handle your audit from day one as if a Tax Court judge or another tribunal might eventually review it. We maintain a thorough paper trail, ensuring that we submit evidence formally (and retain copies) and we present legal arguments in writing. This way, if we do have to protest the results, we have a solid record. Many taxpayers who go alone or with inexperienced reps end up with a poor record – missing documents, no notes of what was said, etc. That can hurt later. We won’t let that happen. By the end of an audit handled by our firm, if we disagree with the outcome, we are already prepared to file a protest or petition, complete with all the facts and relevant laws organized. Our attorneys are also experienced tax litigators who can take the case to Tax Court if needed. The IRS knows our reputation – we will go to court if it’s necessary to protect our client
Often, just that credibility, reputation and winning track record can lead the IRS to back down on marginal issues. We fight hard in tax audits so that if a trial comes, we’ve laid the groundwork for victory. However, in many cases, our aggressive tax audit defense means the case never needs to go to court – we achieve a fair result before it reaches that point. Either way, you want your audit handled by someone who is thinking three steps ahead.
Peace of Mind and Guidance
Beyond the technical aspects, there’s a massive value in having a seasoned advocate by your side – peace of mind. We’ve had countless clients tell us they finally slept at night after hiring us to deal with their tax audit. The stress of facing the IRS, the fear of the unknown, the anxiety of “what if they find X?” – that transfer of burden onto our shoulders is something we take pride in. You don’t have to talk to the IRS; you speak to us. We talk to the IRS. That alone reduces stress immensely. We keep you informed of what’s happening, we explain your options in plain English, and we guide you to make the best decisions. Audits can be nerve-wracking and life-altering, but when you have a professional team managing it, you can carry on with your life and business with far less interruption. And if anything critical comes up, you have a trusted advisor to call who knows your case inside-out.
Concerned About an IRS Audit?
Call the Tax Law Offices of David W. Klasing at (800) 681-1295 or contact us online to schedule a reduced-rate initial consultation. Let our nationally recognized dual-licensed Tax Attorneys and CPAs put their expertise to work for you. We will help you navigate the audit minefield, vigorously defend your interests, and bring you peace of mind. Remember, when it comes to an IRS audit, thorough preparation and aggressive representation are the best antidotes to the IRS’s thorough examination of your affairs. Don’t go it alone – we are here to help you every step of the way, from the first IRS notice to the final resolution. Together, we’ll ensure that your rights are protected and that you achieve the best possible outcome, no matter how thorough (or intimidating) the IRS audit may be.
