Ahead of an expected Biden Administration revamping of the IRS and updating of the Internal Revenue Code over the next year, many have speculated about whether the likelihood of a tax audit or criminal tax investigation will increase soon. Proposals spearheaded by President Joe Biden proclaim to target the tax gap through increased IRS staffing and technological capabilities. The IRS is in the process of hiring a minimum of 87,000 more IRS agents nationwide and is making a massive investment in updated computers for IRS personnel to carry out their duties more efficiently.
If you are concerned that you might soon be the subject of an IRS tax audit or criminal tax investigation in 2021 or beyond, it is in your best interest to speak to a tax attorney as soon as possible. There are some steps you can take right now that may help prevent an unnecessary audit and save you critical time and money down the road.
At The Tax Law Offices of David W. Klasing, we are ready willing and able to assist you with any of your tax needs. Our experienced domestic and international Tax Attorneys and CPAs will help guide you through the complexities getting back into compliance without facing criminal tax prosecution. Call our offices today at (800) 681-1295 or schedule online here to arrange a reduced rate initial consultation.
More Tax Audits in 2021 and Beyond
The IRS alleges that the tax gap or amount of unpaid taxes due to tax evasion schemes has been higher in previous years than most estimates have suggested. The discrepancy, according to IRS Commissioner Chuck Rettig, is due to certain tax evasion techniques that the IRS was previously unaware of, or otherwise unable to combat. In the recent past, the IRS has been subjected to sequestration mandated budget cuts and layoffs, hiring freezes and natural attrition that substantially weakened the agency over time, despite mandates from Congress that the IRS should be taking on more responsibility.
Only 0.01% of S corporations that filed a tax return in 2018 were subjected to a federal audit, according to public information gathered by the IRS. But proposed changes to the functional structure and budget of the agency suggests that the IRS will ramp up audit activity by “50% more than … the previous year,” per IRS Deputy Commissioner De Lon Harris.
According to President Biden’s proposed overhaul of the IRS, the funding increase will enable the IRS to crack down in a few ways:
- Increase technological capacity to identify audit and criminal tax investigations targets more efficiently.
- Bolster internal capability of handling analysis of larger pool of tax returns
- Conduct audits at a rate that would cover a minimum income level for individuals and corporations
- Force banks to disclose information about activity of wealthy account holders
These suggestions are not novel in any way. However, recent statements of both Republican and Democratic leadership on the hill suggest that these initiatives might have bipartisan support for the first time in over a decade. The Congressional Budget Office released a report in July 2020 that estimates a $20 billion increase in IRS funding over the next decade would create $61 billion in revenue – effectively paying for itself. Therefore, it is in the government’s interest to spur the agency towards returning a high yield of previously undiscovered income through a higher rate of tax audits.
Protecting You or Your Business from More Likely Tax Audits in 2021
Individuals and businesses who aren’t deliberately attempting to evade the IRS file their tax returns and other documents with the government every year. There are often inconsistencies with filings that may seem perfectly harmless but have the potential to draw the ire of the government. To avoid the heightened scrutiny and additional audit activity that will occur in 2021, you should act now to confirm that all your past and present filings comply with the Internal Revenue Code. The following are some examples of simple strategies you can implement now that could mend a disastrous problem of the future.
Keep Detailed, Organized Records
Depending on the complexity of your returns, you may choose to use a tax return software program, hire an external tax professional, or keep all your matters in house. No matter what route you have selected, you should be aware that most audits begin due to evidence of facial evidence of tax noncompliance on the returns. By ensuring that your returns are accurate, and your records are easy to access and readily comprehensible in their current form, you can head off the increased chances of IRS tax audit or criminal tax investigation in 2021 & beyond.
Be Mindful of COVID-19 Tax Code Adjustments
You may find it more difficult to navigate the Internal Revenue Code in 2021 due to more frequent alterations to the processes considering the pandemic. Do not be intimidated – a competent Tax Attorney and CPA can explain these new developments to you and make sure that you are not missing any opportunities or stumbling into trouble.
Keep in mind that you will be responsible for the content of your filings. Even if you hire a third-party tax professional who errs, yours is the name that will draw the government’s scrutiny. If your financial circumstances are complex, you need to be sure that you are in the best hands possible.
If you are concerned about the increase in IRS audits in 2021, or with potential criminal exposure over your past tax filings, you should seek the counsel of an experienced dually licensed California Tax Attorney and CPA who can advise you on the inner workings of the IRS and agency audit and voluntary disclosure process. Only an Attorney can engage in the voluntary disclosure process that can protect you from an unpleasant criminal investigation and subsequent criminal prosecution if you indeed cheated on your past tax filings.
Note: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosurebefore the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.
It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.
Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.
As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, KovelCPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth. See our Testimonials to see what our clients have to say about us!
More Commonly Asked Tax Audit Questions
- How should Tax Audits be Handled by Criminal Tax Counsel?
- How to survive audit when I cheated on return being audited
- What is an eggshell audit?
- What is a reverse egg shell audit?
- Why is a reverse egg shell audit dangerous for a taxpayer?
- Warning signs of a criminal referral from an IRS audit
- Effective tax defense counsels goals in an egg shell audit?
- How are the 4 goals and outcomes 1 and 2 best obtained?
- What are the possible outcomes of an egg shell audit?
- Is it my right to know why I was selected for examination?
- What can I do to prepare for an audit?
- What is an IRS civil examination?
- How IRS decides which tax returns are audited
- What are my appeal options if I disagree with IRS?
- What are my basic taxpayer rights if the IRS audits me?
- Options if I am unable to pay at the conclusion of audit
- What a 30 or 90-Day Letter from the IRS means
- What is involved with appealing disagreements?
- Rights to disagree with IRS tax auditor’s findings
- Can I stop the IRS from repeatedly auditing me?
- Can I have the examination transferred to another area?
- Can I record my IRS interview and is it a good idea?
- How many years of returns are at risk during an audit?
- Common reasons for the IRS to conduct a tax audit
- How to avoid negative consequences from an IRS interview
- Have to agree to interview by taxing authority directly?
- Are all audits the same?
- What should I do if the IRS is investigating me?
- What if I don’t respond to a taxing authority audit notice
- Your rights during an IRS tax audit
- Risks of attending an IRS audit without a tax lawyer
- Most common audit technique used by taxing authorities
- Don’t go into an IRS audit without representation
- Why hire an attorney to represent me in an audit?
- Why hire David W. Klasing to represent me in an audit
We Are Here for You
Regardless of your business or estate needs, the professionals at the Tax Law Offices of David W. Klasing are here for you. We are open for business and our team will help ensure that your business is too. Contact the Law Offices of David W. Klasing today to discuss your business with one of our professionals.
In addition to our main office in Irvine, the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los Angeles, San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland, Carlsbad and Sacramento.
Our office technology allows clients to meet virtually via GoToMeeting. With end-to-end encryption, strong passwords, and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client.
