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How Do Audits Work?

Individuals and businesses alike dread the possibility of an IRS audit. When the IRS chooses to audit an element of your return, they more heavily scrutinize the information you included. There are several types of audits you could be subject to, and some are more inconvenient (and serious) than others.

Before an audit begins, you will typically receive what is called a “simple letter” from the IRS. This document will explain there is an issue with your return and claim you owe some amount of money to the government. You can choose to resolve the issue by paying what is allegedly owed, or you can contest the discrepancy. Failing to respond to a simple letter or disputing its contents will generally lead to an audit.

You always have the right to hire a CPA or tax professional, including a tax lawyer, to represent you when communicating with the IRS. If you receive a simple letter that contains information you do not believe is accurate, you should get in touch with our Rock Island tax attorney. 

Types of audits you could have to deal with include:

Correspondence Audits

You may receive an audit letter if you contest the substance of a simple letter. This letter will usually make a specific request for evidence, such as documentation supporting deductions you made. If you do not have the evidence that the IRS is asking for, you can resolve the conflict by paying what is owed, continuing to argue your case directly with the IRS, or litigating the matter.

Office Audits

The IRS may ask you to come to a local office and participate in an interview with a government employee. Because these meetings require additional resources, you should assume the IRS is serious about pursuing the audit. You can bring a representative to the meeting with you, and it is in your best interest to do so. A professional can help you avoid saying something that might expand the scope of the inquiry. 

Field Audits

In a field audit, an IRS employee will come to your home, your business, or your accountant’s office to generally review the information on your return. Field audits are rare, but you should take them very seriously. Do not attempt to manage one without representation.

Line-By-Line Audits

Line-by-line audits are the most inherently intrusive. As its name would imply, this audit involves a line-by-line examination of your return. A small number of tax filers are randomly selected for line-by-line audits each year. The IRS may also pursue a line-by-line audit if they suspect fraud or criminal activity.

When the IRS completes their audit, they may determine there is no change, that you owe them additional money, or that they owe you money in the form of a tax refund. You have the right to appeal and/or litigate audit-related decisions. Our team at Greenwood Law will carefully assess your options and recommend the most advantageous course of action.

The Risks of Ignoring IRS Communications

You should never assume you can outsmart the IRS or your state’s tax agency. If they decide you owe money and you take no action, they have powerful tools to compel you to pay. The IRS or your state’s tax agency could place liens on your property. If you continue to not pay, they could even levy, seize, and liquidate your assets or pursue criminal charges. 

Our Rock Island tax lawyer can help you seek a favorable outcome through all available legal mechanisms. No matter the circumstances, we are committed to helping our clients avoid or minimize the impact of these consequences.

If you are experiencing any sort of tax problem, do not hesitate to call (309) 790-7003 or contact us online for immediate assistance.

Gold Star Fee Policy James D. Greenwood, founder of Greenwood Law, LLC, is a US Navy Veteran. His family has borne the costs of the wars of the United States and its Allies for generations. As such, Mr. Greenwood has specialized guidelines when providing legal services for Gold Star Family.
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