According to the Internal Revenue Service, the IRS audits only a fraction of a percent of all of the federal income tax returns filed in the U.S. each year. Nonetheless, this amounts to approximately one million annual audits. Depending on what the auditor finds, the examination ordinarily results in a negative outcome for the taxpayer, including the assessment of additional taxes, interest charges, and IRS penalties for negligent errors like failures to file or pay. In very egregious circumstances taxpayers can find themselves faced with potential exposure for federal or state criminal tax prosecution where badges of fraud are apparent in their fact pattern.
If you are being audited by the IRS in Orange County, you need an experienced federal tax audit lawyer on your side to provide guidance and protection. At the Tax Law Office of David W. Klasing, we have more than 20 years of tax experience representing businesses, trusts, and individuals in all types of IRS audits. In addition to our extensive legal experience, our founder, David W. Klasing, spent more than a decade as a public auditor, giving our tax firm a superior edge in providing effective audit and appeals representation.
Why Am I Being Audited by the IRS?
While some audits are initiated due to random computer selection, most occur because the IRS needs to examine a piece of information that appears to be missing, incomplete, or inaccurate. In some cases, this can be resolved by simply providing a piece of documentation. In others, the IRS must conduct a more comprehensive assessment of the taxpayer’s records and activities.
If you or your business was chosen for an IRS audit, it likely signals an issue with compliance. In other situations, taxpayers are chosen simply because they possess or exhibit “red flags” for tax fraud – for instance, a business that conducts most of its transactions using cash. Potential reasons you were chosen for an IRS tax audit include the following:
- You claimed large charitable deductions
- You claimed tax credits you did not qualify for
- You did not file one or more tax returns
- You did not report all of your income (including offshore income)
- You reported a very high or low amount of income
What Happens in an IRS Tax Audit?
If you are chosen for an audit, you will be notified via mail with an IRS letter. The type of letter you will receive depends on why you are being audited and what documentation the IRS is seeking. There are three types of IRS audits that you may be chosen for. The simplest and least extensive type of audit is generally a correspondence audit, which is carried out via mail. Another type of audit is the office audit, in which the taxpayer or their representative comes to a local IRS field office to be interviewed. There are two IRS offices in Orange County: one office located in Laguna Niguel, and one located in Santa Ana. The most comprehensive type of tax audit is a field audit, in which the auditor or “revenue agent” will physically visit the taxpayer’s residence and/or place of employment to gather information. The field audit is typically used in situations where there seems to be a major error. Any of these types of audits can double as an “eggshell audit,” meaning there has been a substantial misstatement on the return in question, or as a “reverse eggshell audit,” meaning that a civil IRS audit and criminal tax investigation are occurring concurrently.
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Appealing the Results of an IRS Audit if You Disagree with the Outcome
There is bad news and good news for taxpayers who have been audited by the IRS. The bad news is that, in many cases, audits result in the assessment of additional taxes, interest charges, and/or civil penalties resulting from issues such as delinquent tax payments or return filings. The good news is that, if these outcomes are based on IRS errors as to the law or facts at issue, the taxpayer can request appeals, thereby opening a process that enables the taxpayer to challenge the auditor’s initial findings. Our Orange County IRS appeals attorneys and CPAs are here to facilitate this process and have a great track record, especially where the law and fact were demonstrably on our client’s side. We will also advise you when an appeal is not in your best interest because of a low probability of success or based on cost-benefit type analysis.
To request an appeal successfully, the taxpayer must submit specific materials to the IRS (collectively known as a “letter of protest” or “written protest” or file a tax court petition. Ethier approach typically including copies of IRS notices, a list detailing the specific items in dispute, fact or law-based reasoning for disputing each item, and the taxpayer’s contact information. If, when combined, the assessed tax and penalties in dispute amount to $25,000 or less, it may be possible to file a Small Case Request as an alternative to filing a request for appeals. However, taxpayers should also be advised that Small Case Requests are not available for certain business entities, including partnerships and S corporations.
Federal Tax Return Audit Lawyers and CPAs Serving Orange County, CA
Supported by a dedicated team of dually licensed Tax Attorney and CPAs, our Orange County tax return audit and IRS appeals lawyers and CPAs provide trustworthy guidance and unwavering support throughout all stages of auditing. From helping you prepare before the audit begins, to negotiating and advocating on your behalf, to appealing the results once the audit concludes, we will stand by your side to uphold your rights, minimize your tax liabilities, and mitigate the civil and or criminal tax penalties you are facing. To discuss your income tax return question in a reduced-rate consultation, contact us online, call the Tax Law Office of David W. Klasing in Irvine at (949) 681-3502, or call our main office at (800) 681-1295.
Note: If you have concerns about the privacy of our initial or subsequent communication and are unable to easily travel to our Irvine / Orange County Main Office, consider scheduling a GoToMeeting to safely and securely establish an initial or maintain an existing attorney client relationship. 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. We are generally happy to travel to any of our appointment only satellite offices for a subsequent meeting in appropriate circumstances once a relationship is established via a signed engagement letter and the payment of an initial retainer or where enough retainer is available where a current client to cover the reasonable travel time and time required for the meeting.
Will it cost me more to hire the Tax Law Offices of David W. Klasing, who’s main office and the vast majority of the firm’s staff is located in Irvine California, but an appointment only Satellite office is close to my location, as opposed to a local company? Absolutely not! See our policies that address this issue here.