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Audit wUncle Sam armI.R.S. Tax Audit Defense Lawyer/CPA Advice Of How To Best Defend Against An I.R.S. Audit.

Every individual and business fears getting a letter from the I.R.S. announcing it/he/she has been chosen for a tax audit. This article explains a few critical things to know during the course of an I.R.S. audit to survive with the least financial pain and with the least mental anguish.

The Best Defense Strategy Is To Hire An Experienced Tax Lawyer To Represent You Personally And/Or Your Business Entity Before I.R.S.

Do not make the huge mistake of engaging I.R.S. on your own. Self representing rarely works out well for any taxpayer. I.R.S. auditors are well trained to trick unrepresented taxpayers into making fatal mistakes, like admitting to things that should not be admitted to, providing evidence that need not be provided, etc., all of which I.R.S. will use against the taxpayer later.

As an Orange County / Los Angeles County tax lawyer/CPA with over 30 years experience, I know how to best defend against any I.R.S. audit. I know how to effectively handle I.R.S. auditors, and how to navigate I.R.S. appeals procedure and United States Tax Court litigation if necessary. I advise any taxpayer that I.R.S. has audit targeted to call me for a free telephone consultation well before the audit begins.

Never Speak Nor Letter Correspond Directly With The I.R.S. Auditor.

Accept the truth that the I.R.S. auditor’s job is to build a case file against you or your business, to assert additional tax liability. The I.R.S. auditor’s job is build a case file against you in case you fight on to an I.R.S. appeal, or on to United States Tax Court litigation. To so build against you, I.R.S. auditors always ask, or demand with threats, to speak directly with you and seek to do so before you hire a qualified tax lawyer. This is part of the I.R.S. auditor’s intentional plan to get more tax liability from you or from your business entity. You have nothing to gain and much to lose by talking directly to any I.R.S. auditor. Let your hired tax lawyer do all your talking for you.

Resist the urge to “come clean” with the I.R.S. auditors by providing I.R.S. with way too much talk and/or letter statements. Taxpayers often wrongly think that by consenting to I.R.S. auditor interviews to answer questions directly, the auditor will be kinder, gentler, and will not be as aggressive. This is usually a fatal mistake and often results in a much larger tax bill, or worse, into a criminal tax case. The more a taxpayer speaks to an I.R.S. auditor, the more will typically be owed in the end. A lot can be learned from that large fish on the wall of your friend’s home. Ask yourself what every dead fish on the wall has in common – the answer is an open mouth – don’t suffer the same fate as the dead fish on the wall.

Unfortunately, I.R.S. auditors often attempt to bully with threats, to get what they want from you – your compliance with their demands, which results in more tax liability owed. My belief and practice is to always start an I.R.S. tax audit with professional courtesy and to appropriately respond to I.R.S. auditor evidence requests that are reasonable and legal. Too often, I.R.S. auditors routinely engage in improper abusive and/or illegal misconduct to get what they want. When this happens my belief and practice is to swiftly put an end to I.R.S. auditor misconduct, and where appropriate, to expose misconduct to the appropriate I.R.S. managers. Many taxpayers think that challenging I.R.S. auditor misconduct will result in retaliation and a larger tax bill. Although this belief is pervasive, it rarely is true. With over 30 years experience, I know that the more a taxpayer fights the I.R.S. in an audit, typically the less additional tax the taxpayer will owe as a result of an audit.

Do Not Form 872 Consent To An Extension Of Time To Legally Charge Additional Tax.

Generally, the I.R.S. has three years from the filing of a tax return to charge additional tax, interest, and penalties (called the “Assessment Statute Expiration Date). Because many audits start around two years after a tax return is filed, and because I.R.S. audits tend to take several months, the I.R.S. auditor usually asks the taxpayer to execute I.R.S. form 872, Consent to Extend the Time to Assess Tax, including interest and penalties. Although many tax practitioners advise taxpayers to sign an extension of time to give the I.R.S. auditor more time to audit, it is unwise, if not absurd, to provide I.R.S. more time to perfect its audit case file against you by executing form 872 to extend the Assessment Statute Expiration Date.

Perhaps the majority view, though flawed, is that a taxpayer should bend over and execute the form 872 extension as the I.R.S. auditor desires, or the auditor will retaliate by issuing an audit Notice of Deficiency (final I.R.S. audit opinion) alleging more liability. It is absurd and wrong to give the I.R.S. auditor more time to make your life miserable, and more time to perfect an I.R.S. audit case file against you. I advise it is better that you exercise your right to not execute a form 872 extension, accept that the I.R.S. auditor will retaliate by a guessed or estimated Notice of Deficiency allegation of additional tax liability, then proceed to United States Tax Court to attempt a quick settlement without any trial, with I.R.S. lawyers, or with I.R.S. Appeals. It is better to get rid of I.R.S. auditor as quickly as possible by refusing to execute a form 872, take the revenge Notice of Deficiency, then proceed to settlement negotiations with I.R.S. Appeals or with I.R.S. lawyers, based on a weaker I.R.S. audit case file.

Never Fall Victim To An I.R.S. Auditor’s Abusive Improper Administrative Summons.

If an overly aggressive and abusive I.R.S. auditor does not get what they demand (i.e., like a demand the taxpayer appear for live in-person testimony before the I.R.S. auditor, or anything else), most auditors routinely deploy their bullying tactic of serving a taxpayer with an administrative summons demanding with threats, that the taxpayer appear in-person before the auditor to testify answer auditor questions and provide the auditor evidence. Do not fall for this I.R.S. abuse trick by doing as the I.R.S. auditor demands, and especially do not appear before the auditor and provide live testimony. While I.R.S. auditors are entitled to reasonable relevant responses to proper evidence requests, the abuse tactic of administrative summons is wrongful if the taxpayer or tax lawyer representative reasonably responds. Only if a taxpayer refuses to materially cooperate with an I.R.S. auditor requests for relevant evidence would a the use of an administrative summons be proper.

A bullying I.R.S. auditor does not want you to know that an administrative summons is not a self-enforcing legal document, meaning that if a taxpayer does not comply with the administrative summons’ demands, the I.R.S. cannot do anything to the taxpayer: cannot arrest or jail, cannot charge a fine or penalty, and cannot charge additional tax liability. In order for the United States to enforce an I.R.S. administrative summons, the I.R.S. auditor must convince his/her bosses to request I.R.S. lawyer approval to proceed, and I.R.S. lawyers must ask the United States Attorneys’ Office, to file a summons enforcement litigation in United States District Court, seeking a judge’s order to comply with the summons. Rarely does the United States commence summons enforcement litigation in United States District Court.

Never Forget The I.R.S. Auditor Has No Power To Charge Additional Tax, Interest, And Penalties.

Many I.R.S. auditors brag, and act as though they have power to charge taxpayers additional tax liability. Such is nonsense! I.R.S. auditors have no power whatsoever to charge you any additional tax liability. In truth, I.R.S. can only charge additional tax liability in one of three ways: {1} you consent in writing to be charged additional tax liability, {2} I.R.S. proceeds to audit Notice of Deficiency and you fail to file an United States Tax Court petition within 90 days from the Notice of Deficiency date, or {3} the United States Tax Court determines additional liability by trial decision or by your settlement agreement.

If You Want To Pay Less Tax Than The I.R.S. Auditor Demands,
Then Fight On –The Most Common Result Is You Pay Much Less.

If you have an experienced tax lawyer representing you, the results will likely be you end up owing much less if you fight the I.R.S. auditor’s allegations of additional liability by Notice of Deficiency. See my article “How To Challenge An I.R.S. Audit” for discussion of I.R.S. audit procedure.