Published on: September 23, 2019 Last modified: May 26, 2020

Why You Need a Tax Attorney to Defend You Against a Tax Return Audit

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    tax return audit

    In 2017, over 1 million tax returns underwent a tax return audit by the IRS, and 2,886 returns in 2018 underwent a criminal investigation. But audits from the IRS are still down in number, and the agency says that is due to a lack of funding.

    As such, the agency is seeking $15 billion dollars from the federal government to increase the number of tax audits in America. They expect this will lead to an additional $47 billion in federal revenue, and that desire for more tax revenue is putting you at risk for an audit.

    Even so, of the 1 million that were audited in 2017, more than $6 billion went back to the taxpayer in refunds.

    You may not be able to access these refunds if you are doing your own tax return audit. Discover here how that purpose and several more should compel you to hire a tax attorney if you are ever facing an audit.

    Types of Tax Return Audits

    There are a number of types of tax return audits, and there is no one method that is “better” than others if you are facing them. The three main types of audits are a correspondence audit, a field audit, and an office audit.

    A correspondence audit is one that generally happens strictly through correspondence, and today much of that is handled by email.

    The IRS says that of the millions of audits in 2018, 74.8 percent were correspondence audits. If you undergo a correspondence audit, you should always speak to an attorney before you put anything in writing.

    An office audit is the kind of audit where the IRS will ask you to come to their office with documents. This is more complex than a correspondence audit, and you will be invited by the IRS to come to their office.

    They will be very specific in what documentation you need. This invitation is not the kind that you can say no to.

    Field audits are very common, particularly for businesses. These involve the IRS coming to your location to conduct an audit.

    You can request the audit happen at the IRS office instead, but you will need to provide reasonable explanations as to why. Saying no to a field audit could be something that sends a red flag to the IRS in itself, so be careful how you handle this.

    No matter what kind of audit you are facing, always talk to a tax attorney before you submit anything in writing. The second you receive notice of an audit you should consult an attorney because there are 7 other things that could happen in a tax return audit when you receive that notification.

    Accountant – Client Privilege Doesn’t Exist

    Tax attorneys and accountants aren’t the same things, and a key difference outside of legal knowledge is client privilege. It does not exist in a criminal matter with accountants.

    They can hand over anything.

    If you have received notice of a tax return audit, your first impulse may be to call your accountant or the accountant that prepared your return. You may even want to call one right away if you prepared your own return.

    That’s a good thing to do, but you should still call a tax lawyer.

    Accountants would have access to all of your paperwork and required documents, but they won’t know how you should fight for your rights.

    Additionally, the accountant that prepared your return may be worried about themselves, if they didn’t do something properly on your return. They will be more concerned about their rights than yours.

    It presents a conflict of interest at audit time.

    A Case of Privilege Lost

    The Supreme Court has long-held that accountants do not have attorney-client privilege in a criminal matter, but tax attorneys do. The Internal Revenue Code 7525 of 1998 holds an “accountant privilege,” but that privilege disappears during a criminal matter.

    In a 2009 case in the 6th Circuit of Appeals known as the United States v. Rutherford, any statements made by the defendants to their tax accountant could be submitted as evidence. When the accountant in the case, a CPA, realized the individual needed legal representation, they did not advise their client accordingly.

    That weakened the rights of the defendant, who was ultimately prosecuted criminally for that tax return audit.

    An accountant may feel free to hand over whatever they want on your file to the IRS to save themselves. Your tax attorney may not want them to do that.

    Be careful what you say to your accountant.

    You Can Accidentally Say Too Much

    When you are facing a tax return audit, your first defense will be to get defensive. You may reply right away to an email or submit something that maybe you don’t need to submit.

    You want to clear your name right away, but this could lead to more problems down the road.

    Tax attorneys know your rights, and what you should and shouldn’t say or submit to the IRS. Avoid the problem of saying too much inadvertently by calling a tax attorney as soon as an audit comes to the table.

    Do not destroy or submit anything you aren’t sure of until you contact an attorney. Take note of these 11 red flags that may spark a tax return audit, or get you in trouble when you are defending yourself during one.

    You Don’t Know Your Rights

    If the IRS is communicating with you about an audit, your rights are not at the top of their minds. They will, of course, follow the law, but they are putting their interests first.

    And the interests of the IRS are to collect as many taxes as they can to keep federal revenue flowing the way they want it to. The IRS is as under-funded as any federal agency, and one of the ways they combat that is by collecting your money.

    They aren’t worried about whether or not you know your rights, and the IRS isn’t worried about whether or not you know them either. Your tax attorney does though.

    There are legal strategies in place that can help you undergo a successful tax return audit, and may even get you more in a refund. A tax attorney knows how to do this.

    Your audit has a better opportunity at being completed faster and achieving a better outcome if an attorney is in charge.

    It is intimidating for any Michigan taxpayer to have to deal with the IRS. However, not many people know that the IRS adopted a taxpayer bill of rights.

    While it seems fair that taxpayers have certain rights, the tremendous power of the IRS to enforce tax laws can prove intimidating for taxpayers facing IRS scrutiny. The IRS can punish taxpayers through the use of audits, liens, and wage garnishments. In some instances, taxpayers may even face criminal penalties and jail time.

    What These Taxpayer Rights Include

    There are ten items within this taxpayer bill of rights that are applicable to all taxpayers. Some seem like commonsense. For example, the IRS needs to inform taxpayers regarding what steps to take to be in compliance with tax laws. Taxpayers also have a right to receive quality services when it comes to tax advice and preparation.

    However, taxpayers also have the right to only have to pay the correct amount of tax, and not have to pay one cent more. Taxpayers also have a right to challenge the IRS on rulings. This includes the right to raise objections and receive a formal response from the IRS.

    In many instances, taxpayers can appeal adverse rulings. Taxpayers also have the right to know the time period needed to challenge any positions taken by the IRS.

    The IRS needs to respect the rights to due process for taxpayers. Taxpayers also have rights concerning privacy and confidentiality.

    Most importantly, taxpayers have the right to have an experienced tax attorney at their side during any proceedings. And they have a right to expect the tax system to be just.

    You May Miss or Forget Deadlines

    When you are undergoing a tax return audit, you will always be given deadlines and precise information. But you may not know what the IRS means about something, or may not be sure of what to hand in.

    Not only do you not want to say too much to the IRS, but you also don’t want to miss something critical. Failing to provide the proper paperwork to the IRS could be seen as an avoidance tactic, even if you innocently missed something you shouldn’t have.

    Your tax attorney will know every deadline, every filing that needs to occur, and every piece of paperwork that is needed to secure a positive outcome for you.

    If you miss a deadline or don’t provide the right information, you could be penalized or even lose some of your appeals rights. Contact a tax attorney as soon as you are faced with an audit, if for no other reason than to ensure the correct procedure has been followed.

    Peace of mind is easy to come by in an audit when the administration of the audit on your end is handled properly and in a way that maintains your rights. That’s what tax attorneys do.

    Let Professionals Relieve Your Headaches

    Today, declining resources at the IRS are leading to more audits, and some of those are leading to criminal investigations.

    David Kautter who was the assistant Treasury Secretary for tax policy in 2018 says that in an age of technology, it’s easier to spot red flags and areas of noncompliance with the tax code.

    Submitting false information on your tax return is easy if you don’t know what you are doing. The IRS is counting on that, and the Congressional Budget Office (CBO) is hoping to fund more money to the IRS to spot those red flags.

    As a result, the IRS is hoping this extra funding could help them get even more money from you to the tune of $55 billion dollars over the next ten years. The CBO is hoping to make $5.20 for every $1 they give to the IRS.

    Those numbers alone can give you a headache, and that headache will peak in intensity if you ever receive one of those IRS letters saying, “Please drop by with your paperwork.”

    Your first thought will be that you don’t know what to do. You may even try emailing or writing back with some explanations.

    Don’t. 

    Contact the experienced tax attorney pros working 24/7 at the Silver Tax Group today and make the headache from your tax return audit a thing of the past.

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