San Jose, CA Federal Tax Return Audit Attorney + CPA
Approximately 1 million taxpayers are audited by the Internal Revenue Service each year. If you are among them, you need and deserve aggressive and competent legal representation. An audit may uncover indicators of fraud, potentially giving rise to a criminal tax investigation and felony tax evasion charges. Even if the auditor fails to discover criminal activity, there is still a risk that you or your business will be heavily fined, receiving civil penalties and interest charges in addition to any additional tax assessed.
If your personal or business income tax returns are under audit by the IRS, make sure that you have vigorous legal representation. At the Tax Law Office of David W. Klasing, we are San Jose tax audit lawyers and CPAs with over 30 years of tax and accounting experience, including more than 10 years of public accounting auditing experience. If you were chosen for an IRS tax audit, choose our California tax firm for help.
See our Audit Representation Q and A Library
How Do I Know if the IRS is Auditing Me?
Overall, there is a low statistical likelihood of being audited by the IRS. However, certain taxpayers are at higher risk, including high-earning taxpayers, self-employed taxpayers, and taxpayers who claim charitable deductions. While exact numbers fluctuate, the IRS typically audits about 1 million tax returns each year, which accounts for roughly 0.5% of all returns filed annually. So how do you know if yours is one of them? If the IRS decides to audit your federal tax return, you will be notified via mail. If you receive a phone call or an email from somebody claiming to work for the IRS, be on high alert for a scam.
How Long Can the IRS Audit Me?
Be advised that the IRS may audit for up to three years from the due date or date of filing, up to six years from the due date or date of filing, or potentially even indefinitely, depending on the situation. For more information on this subject, refer to our articles on the following topics:
- How Many Years Can an IRS Audit Go Back?
- What is the Statute of Limitations for the IRS to Assess Tax?
- What Will Reset the IRS Statute of Limitations Period?
Why is the IRS Auditing My Tax Return?
A small number of audits are triggered by random computer selection. However, most audits spring from factual inconsistencies or other tax errors – for instance, an IRS determination that the taxpayer underpaid federal income taxes, underreported his or her earnings, or failed to file IRS forms – placing taxpayers in a dangerous position from the very outset of the process. Common reasons the IRS will audit a taxpayer or business entity’s tax returns include the following:
- Claiming too many tax credits or deductions (such as charitable deductions)
- Failing to file income tax returns
- Failing to pay the estimated taxes owed
- Filing tax returns late
- Filing tax returns using stolen Social Security Numbers (SSNs) or other personal information
What Happens if the IRS Finds an Error on My Return?
If the IRS finds errors while auditing your tax return, there may be several consequences. If the error seems minor or accidental, the IRS may simply request additional forms or information, which could be sufficient to clear up the issue and end the audit. If the error is significant, the auditor will want to examine your records closely, and may even come to your home or business in search of financial documentation.
If the auditor finds indicators to suggest that the error was intentional, or “willful,” he or she may end the audit and refer your case to the IRS Criminal Investigation Division (IRS-CI). At that point, a Special Agent from IRS-CI is assigned to investigate you for tax fraud, creating a danger of criminal prosecution. If IRS-CI determines that prosecution is appropriate based on the available facts and evidence, the IRS will refer your case to the Tax Division of the U.S. Department of Justice (DOJ).
See our Criminal Tax Law Q and A Library
What is the Penalty for Filing an Incorrect Income Tax Return?
The answer to this question depends on whether the taxpayer made an honest tax mistake or acted willfully to evade federal income tax liabilities. In the former scenario, the taxpayer may face IRS penalties for failure to file and/or failure to pay taxes, depending on the nature of the violation. These penalties are as follows:
- Failure-to-File Penalty – 5% per full or partial month the non-filing persists
- Failure-to-Pay Penalty – 0.5% per full or partial month the non-payment persists
If the error was willful – in other words, if the taxpayer engaged in tax fraud – criminal penalties and civil fraud penalties may be imposed. The civil fraud penalty, in accordance with 26 U.S. Code § 6663(a), amounts to 75% of the underpayment. As the statute provides, “If any part of any underpayment of tax… is due to fraud, there shall be added to the tax an amount equal to 75 percent of the portion of the underpayment… attributable to fraud.”
Moreover, the taxpayer will face criminal penalties, which vary depending on the precise nature of the fraud. For instance, under the federal tax evasion statute (26 U.S. Code § 7201), maximum tax evasion criminal penalties are up to five years in prison and fines up to $100,000 ($500,000 for corporations). The penalties for willful failure to file or pay taxes include, under 26 U.S. Code § 7203, maximum fines of $25,000 and up to one year in prison. For more information, refer to our article discussing civil and criminal penalties of income tax fraud.
Can I Appeal the Results of an IRS Audit?
The short answer to this question is yes, potentially. However, you must submit multiple documents to the IRS exhaustively outlining and supporting your position within specified deadlines, citing the facts, laws, or court decisions on which your appeal will be based. It is in your best interests to seek an experienced IRS audit appeals attorney to represent you throughout this process, which demands a technical, in-depth familiarity with the Internal Revenue Code and various Tax Court rulings.
See our IRS Appeals Q and A Library
San Jose, CA Federal Income Tax Return Audit Lawyers and CPAs
Our tax office represents C corporations, S corporations, LLCs, non-profit organizations, sole proprietors, freelancers, independent contractors, retirees, high net-worth individuals, business owners, CPAs, servicemembers, resident aliens, non-citizens, and other taxpayers in federal income tax audits and appeals. Contact us online today to arrange a reduced rate consultation or call our San Jose tax office at (805) 617-4566. Please note all meetings at our San Jose tax office must be scheduled in advance.
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