Orange County Tax Lawyer
Facing an IRS Audit?
For many, an address in California and Orange County means a desirable climate, ample business opportunities, and a rich cultural tapestry to enrich your life. However, according to a study performed by the National Taxpayer Advocate, to the IRS a posh zip code can represent an enforcement opportunity for the agency. The study revealed clusters of IRS tax enforcement activity in affluent areas outside of major urban centers like Los Angeles. Small business owners and individual taxpayers in targeted areas may find it prudent to take proactive measures to guard against the increased risk of facing an IRS audit.
Facing a tax audit is a difficult situation for any taxpayer. For many, knowing that they will be facing a tax audit administered by a trained government agent is enough for panic to set in. But, panicking over a tax audit is neither heathy nor productive. Spending your energy on non-productive worry and anxiety is a surefire way to be unprepared when your tax audit does finally arrive. But, you do not have to prepare for or face the audit alone. The Tax Law Offices or David W. Klasing are dedicated to working with taxpayers facing an audit or other enforcement action. To schedule a reduced-rate consultation, call our firm at 800-681-1295 today or contact us online.
Can I be audited by the IRS for a Failure to File Taxes?
You may or may not face a tax audit for failing to file taxes, but if you were required to file a tax return you almost undoubtedly will have the IRS file your taxes for you. While to the tax layperson this may seem like a means to fool the IRS into doing your taxes for your, in reality an IRS-filed substitute for return will not take the taxpayer’s interests into account. A substituted return does not permit for reducing one’s tax burden through tax credits or deductions.
There are a myriad of reasons that can cause an IRS audit or make a tax audit more likely. Taxpayers who make math errors, round in their math, or use only whole numbers are more likely than average to face a tax audit. Likewise, taxpayers who provide implausible information to the IRS are also more likely to face a tax audit. For instance, a taxpayer who earns $30,000 a year but claims $20,000 in business expenses would likely raise red flags because it would be exceedingly uncommon to spend two-thirds of one’s employment income on business expenses. Similarly, an individual that claims $30,000 in charitable donations while earning $60,000 would also raise suspicion due to the implausibility of the numbers provided.
All of these examples are based on the IRS’ underlying assessment of the likelihood that the taxpayer under paid their taxes and that there is potential for additional revenue through a reassessment. This assessment is conducted and tabulated into what is known as a Discriminant Inventory Function (DIF) score. Higher DIF scores indicate a greater likelihood of tax noncompliance while a lower DIF score indicates a reduced likelihood of tax noncompliance. While DIF is not an indicator or predictor of guilt, the IRS claims that its metric is reliable.
What Should I Do After Being Notified of an IRS Audit?
While it is undoubtedly true that a tax audit can give rise to uncertainty and anxiety, working with an experienced tax professional can eliminate the guess work and answer your questions. For instance, taxpayers are often concerned about the first step they should take after receiving an audit notice. While every tax matter is unique, there are certain steps a taxpayer can take in any matter.
First, all tax audits will require the taxpayer to locate, analyze, compile, and use a wealth of financial, tax, and other documents. Taxpayers are required to produce all documents relevant to their tax audit. Records related to assets held by or under the taxpayer’s control should be kept for the duration of the ownership or control of the asset, plus an additional three years. Tax records should be retained by the taxpayer for at least six years. Payroll tax records are required to be kept, by law, at an accessible location or facility for a minimum of four years. If the taxpayer is unable to produce relevant tax or financial documents, the taxpayer may not only harm his or her chances to reduce or eliminate the consequences faced, but also open the taxpayer up to additional charges for record keeping failures.
Rely on our Tax Audit Experience in Orange County
Our experienced tax lawyers are dedicated to serving taxpayers in Orange County and beyond. If you are facing a tax audit or another type of tax issue, the Tax Law Offices of David W. Klasing can help. To schedule a reduced-rate consultation, call our tax professionals at 800-681-1295 or contact us online.