what to do when the tax man comes for you Custom Essay

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Title:what to do when the tax man comes for you?
Placement: Tax Taxi
Date: 5/10/2014
Words: 802Notes:
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f you chose to represent yourself in an Internal Revenue Service Examination realize the IRS Revenue Agent (RA) or Tax Compliance Officer (TCO) assigned to your file is trained very thoroughly to advocate

on behalf of the United States Government. One method used quite often is to create a (false) sense of security in the personal interview setting or even on the phone with cathartic yet repetitive narratives. This

is done in my humble opinion to lull you into a sense of complacency which subsequently if not held in check leads to providing responses way beyond the scope of the audit matters in question. More

importantly when you talk too much you are creating opportunity for the RA or TCO to potentially broaden the authority of the audit should you happen to say something inadvertently that could appear

circumspect.
When it comes to the actual audit process:
1. Recognize the IRS RA or TCO assigned your file is a person too who is just trying to do their job of advocating as aggressively as allowed by law on behalf of the US government and resist the urge to

posture aggressively in response as it accomplishes very little to nothing and is generally futile. Most RAs and TCOs are reasonable and I’ll even go out on a limb saying that there even a few that are

outstanding which can be a sincere blessing. If however you get an IRS RA or TCO that is a unilateral jackass – they do exist – this is where you need to focus on internalizing emotions and recognize you can

request a different examiner.
2. Be prepared. Usually the IRS will issue you an Information Document Request (IDR) in advance of the audit, be sure to have all documents in order as requested in the IDR.
3. If the IRS insist on conducting an in person meeting at your place of business try first to get the venue changed to ANY PLACE THAT IS NOT YOUR PLACE OF BUSINESS OR YOUR PRIMARY

RESIDENCE. For more information on why this is important contact me directly.
4. Be professional, cordial and polite but offer no small talk.
5. Remind the IRS RA or TCO that the same goal of efficiently closing the file at hand is shared by both sides AND THE BEST WAY TO DO THAT IS TO STICK WITH THE ISSUES AT HAND.
6. Respond promptly to any follow up requests made but first insist that the request be made in writing.
The most important take away from this post is that if you are not going to hire an Enrolled Agent to provide representation service, at the very least:
1. Recognize that the IRS RA/TCO (Examiner) IS NOT YOUR FRIEND – no matter how ‘connected’ to the individual examiner(s) involved you may grow to ‘feel’ over time.
2. Remember to answer only questions asked. One of my many mentors used to tell me over and over again, if they ask you if you know the time, don’t tell them how to build a watch.
For more information check out what happens in a compliance check as well as what happens in an audit.
In accordance with Circular 230 Disclosure

Nothing brings greater fear than a letter from the IRS. Refund checks are sent in a window envelope; all other tax matters, like audits, are sent in a plain white wrapper. When the letter comes, you need to arm

yourself with an understanding of the IRS audit process and procedures.
Armed with knowledge, you can win an audit, even if you made a mistake. The key is understanding how the IRS works from the inside. Auditors are trained to ask questions that reveal unreported income

and overstated expenses. How you answer the auditor’s questions can determine the tone of the audit. The IRS audit process is exposed here. Use this information to protect yourself from the IRS.

The Audit Starts
The IRS letter will either have a date to meet the auditor or a phone number to call the auditor and set an appointment. The later is most common. If you have a business the auditor will need to view your

business area or store at least once. Even if you have an accountant or tax attorney, the auditor has the right to speak with you initially. The auditor will exercise that right.
You need to prepare your paperwork prior to visiting the auditor. It is common for an audit to take place two years after the return is filed and you will need to become familiar with your documents from the

year in question. It is also common for the tax year on either side of the audited return to face review.
Gather all your documents and add them up. Compare them to the tax return filed. Review your bank statements; compare deposits against reported income. Prepare an explanation if your deposits are greater

than reported income. Loan proceeds and transfer of funds from one account to another are common explanations. Have supporting documents available.
• The IRS Installment Agreement
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• 9 Best Tax Software Programs
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Dos and Don’ts
An IRS audit is not an accusation. Answer questions honestly. Don’t volunteer any additional information. If you have unreported income, missing receipts, or fraud connected with your tax return, you need

professional representation.
• Don’t try to bribe the auditor. Yes, people try it. It does not work. It can also get you in very hot water.
• Don’t drag out the audit unnecessarily.
• Do not rush an audit. Take the time needed to document your numbers. If you need more time, ask for it. If denied, go over the auditor’s head to her supervisor.
• Do expect the audit process to take months. The initial review leads to weeks of waiting for results. This is common. An audit can take a few months to over a year. A long audit is nothing to worry

about.
• Hire professional help. You should not represent yourself in an audit, even if you are a tax pro. If you are a tax pro, don’t represent returns you prepared. Work with another accountant to

represent the other’s audits. The IRS likes to use preparer penalties as a wedge between client and preparer. As preparer, you may have done nothing wrong, but the IRS may threaten you to get at your client.
• Be respectful. Auditors are working a 9 to 5 job, like you. Make their life easier and it may make your life easier.
• Don’t agree with everything the IRS auditor says. If she is wrong, be firm and say so.

How did your IRS audit turn out?
• Did it myself and owed money
• Did it myself and received a refund
• Hired an accountant and owed money
• Hired an accountant and received a refund
• I ignored the audit letter hoping the IRS would forget they sent it
See results without voting

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After the Audit
When ink has dried on the determination letter, you have several choices, depending on the outcome.
• No adjustment. You deserve a high-five. Your numbers proved out. The IRS has a habit of NOT auditing returns that don’t generate revenue. Your future audit risks just declined.
• Refund. Shame on you. Your audit risk declined because you have the nasty habit of overpaying your taxes. Either take greater care to prepare an accurate return or hire a professional.
• Tax assessment. The IRS says you owe them money. Know that the auditor is wrong as often as right. File an appeal. Consider tax court if appropriate. You also need to take greater care to

preserve documents (if the tax due comes from lost receipts) or spend more time filing an accurate return. Consider a tax pro. Tax professionals pay for themselves many times over. By saving a few bucks in

preparation fees, you may be over paying your taxes by double that amount.
• 1040.com
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Conclusion
The IRS audit process and procedures is not a deep dark secret. IRS rules are very strict, applying to you and them. Congress gave us a taxpayer Bill of Rights. The IRS sends a copy of your rights with each

letter. Read and exercise them