What is IRS Audit Representation?

IRS Audit Representation

An IRS audit refers to a formal probe into your financials after reviewing your tax returns. It can be in the form of mail or in-person and the magnitude varies depending on the case. IRS Audit Representation entails working with a professional to communicate on your behalf with the IRS.

The IRS uses its automated tracking tools to identify any red flags in your filed returns. Some taxpayers can receive a random audit call from the IRS as well. But most of the time, it is due to discrepancies or missing information.

As the name suggests, audit representation is when you have someone by your side during an IRS audit. It can be in the form of an attorney, a certified public accountant (CPA), or an enrolled agent (EA).

The goal of having audit representation is to ensure that the taxpayer’s rights are protected throughout the process. They can also help reduce the chances of an IRS audit or minimize potential penalties.

Taxpayers enjoy the rights of audit representation or audit defense. It means you can ask a professional to represent your case in front of the IRS.

In most cases, you do not formally need to appear before the IRS. A qualified and authorized tax professional can represent you in an IRS audit.

These professionals include:

  • Enrolled Agents (EAs)
  • Certified Public Accountants (CPAs)
  • Attorneys
  • Qualified Tax Preparers

The most important thing however is that you go with someone that you trust and that has a proven track record of success in handling your type of case.

Types of IRS Audit Probes

You may receive a simple letter in the mail from the IRS asking for some basic explanations. In other cases, you may get a comprehensive review call from the IRS.

There are different types of IRS audit probes and each one depends on the severity of the case under consideration.

Correspondence Examination

Correspondence or mail audit probes are regular and can be resolved easily. All you have to do is to provide documents or an explanation asked by the IRS.

Office and Field Audits

An office audit probe requires taxpayers to appear before IRS officers. You may ask a CPA or other representative to represent you against the probe.

A field audit means an IRS officer visiting your home or office. Again, you can ask a professional to represent your case.

Line-by-Line Audits

The IRS may choose some taxpayers randomly to examine their tax returns on a line-by-line basis.

Apart from mail audits, all other types of audits are comprehensive and require careful planning to satisfy the IRS.

When Do You Need the IRS Audit Representation?

If you receive a simple letter from the IRS, send in the required information and your case may be settled quickly.

However, the IRS may require a comprehensive review of the tax returns you filed. Further, the probe may extend into a review of the financial statements and other documents.

Once your IRS audit is completed, you get a 90-days notice to respond. You can choose an experienced and professional representative to present your case here.

You’ll need IRS audit representation during the audit process usually. However, if your case is complicated and you appeal against the IRS review results, you’ll need representation in the court as well.

What are Your Options in an IRS Tax Audit?

You can choose one of the several pre-audit and post-audit responses when you get an IRS audit probe.

Formal Protest

A formal appeal helps you represent your case before the IRS. It is a useful option for taxpayers who have documented proof of tax returns or small errors in the tax returns.

Mediation

Your tax representative can choose the mediation process if there are several audit objection points. This method lets you resolve audit objections without further escalating the issue.

Small Case

You can file an appeal against the IRS tax verdict if the total penalties imposed are less than $25,000. However, the IRS must accept your application for this process.

Offer in Compromise

You can formally negotiate the tax penalties with the IRS. You can reach a formal agreement with the IRS to pay a certain amount in penalties and the payment plan.

Check out our Ultimate Guide to IRS Tax Resolution

Fast Track Settlement (FTS)

This option is suitable for taxpayers who want to quickly resolve their audit dispute. The FTS program works for taxpayers with minor reporting or calculation issues.

How the IRS is Planning to Intensify Audits?

The IRS recently received additional funding upwards of $80 billion through president Biden’s recently-announced Inflation Reduction Act.

The agency is expected to use a portion of these funds to increase the number and scope of tax audits in an effort to crack down on non-compliance.

The IRS has already announced plans to hire nearly 700 new auditors this year, and it’s possible that even more positions will be added in the coming months.

In addition to increasing the number of auditors, the IRS is also expected to intensify the audits themselves.

In the past, many audits have been conducted via correspondence, with taxpayers simply sending in documentation to support their claims.

However, going forward, we can expect to see more in-person audits, as well as an increase in the number of areas that will be scrutinized.

For example, the IRS is now planning to take a closer look at expenses related to home offices and remote work, as well as business entertainment and meals.

The agency is also expected to audit a larger number of high-income taxpayers and those who have complex financial situations.

Given the increased focus on audits, it’s more important than ever for taxpayers to make sure they are in compliance with the tax code.

What should I do if I get an audit notice?

The big picture is that the IRS is definitely going to accelerate its tax probes and audits in the coming years. Individual and business filers can both expect an accelerated audit rate in the future.

If you are selected for an audit, it’s important to be prepared and to have all of your documentation in order. You’ll need professional help and advice in every stage of the IRS representation process from lodging a formal appeal to preparation and from presenting proof to negotiations with the IRS.

You should contact a tax professional or accountant who can help you navigate the process and ensure that you are in compliance with all of the rules. Luckily, BSM Accounting Services in Clifton NJ has ample experience representing clients facing IRS Audits.

Receiving an IRS audit notice can be a stressful experience, but it’s important to remember that you have options.

Contact us today and book a free consultation!

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