What is Tax Audit Representation?

Tax audit representation, also known as audit defense, is a service where a lax or legal professional stands on behalf of a taxpayer— whether it’s an individual or an entity, during an Internal Revenue Service (IRS) or state income audit.

During an income tax audit or examination, an authorized representative is permitted by the IRS or the state to conduct the audit. However, there are some requirements that representatives must meet, including having permission to practice before the IRS or state and specific credentials.

The types of representatives who are permitted to represent taxpayers in front of the IRS during income tax audits include:

Enrolled agents

Your audit representative will develop a strong strategy to defend your case. They will also help you prepare all required and/or requested documents and will attend all meetings with you in addition to handling all correspondence on your behalf.

What Happens During an Audit?

Though getting an audit can be quite terrifying. The good news is that 70% of all audits are simply a letter asking for more information regarding tax returns. All you have to do in these cases is mail-back forms that provide your income and/or deductions.

In other instances, you might be invited to meet with an agent to go over your tax forms.

Never Ignore the IRS Letter

You should never, under any circumstances, ignore the audit letter you receive from the IRS. This situation will not go away on its own. Instead, contact the IRS ASAP and as well as getting in touch with a tax representative, like a tax preparer or attorney, to help guide you through the case.

Finding Representation

When you receive notice that your tax return is being audited, you will likely freak out. The good news is there are plenty of trained professionals who can help you understand and navigate your case. They will provide expertise and professionalism when dealing with the IRS or state, and they will ensure you know your rights and have turned in all of the required documentation on time. What’s more, IRS agents prefer working with tax professionals or attorneys because they know they can count on them to prepare the requested information in an easy-to-read, professional way.

Did you know that only 2% of audits are random? This means that 98% of the time, the IRS will have very specific questions they need you to answer, and the forms and receipts they request will be in accordance with their questions. This means you must bring the appropriate forms and answer their questions honestly. Is there anything scarier than answering questions from an IRS agent? This causes a lot of taxpayers to freak out, freeze up, and withhold information. You can avoid this by hiring a tax attorney who will prepare you for the questions and let you know the best way to answer them.

Who can represent the taxpayer at an IRS audit?

Enrolled agents

How does the IRS choose who they audit?

The IRS uses a few methods to choose who they audit:

Random Selection/Computer Screening: Sometimes, a return may be chosen by a statistical formula alone. The IRS compares individual tax returns against the “norms” for similar returns.
Related examinations: The IRS may also select returns to audit when they involve issues or transactions with other taxpayers, like business partners or investors, whose returns were chosen for audit.

What are the three types of IRS audits?

Mail Audits: These are the most common and require taxpayers to mail in documents in response to the IRS’ specific questions or requests for information.
Office/Field Audits: These audits are much more serious, and the IRS will ask for information to validate your deductions and credits while also looking closely at your lifestyle, income, and business activity to see whether your tax return is accurate. Most tax evasion cases start from field audits.
CP2000 notice (underreported inquiry): This one isn’t technically an audit, but it is very common. In fact, the IRS sends almost 4 million CP20000 notices every year. It is a discrepancy notice that proposes a specific increase in taxes on the return. The IRS automatically sends these notices when there’s a mismatch between the income that you reported on your return and information that your employer or other payer provided to the IRS through statements, such as Form W-2 and Form 1099.

What triggers IRS audit?

The automated, random computer trigger
You earn a lot or very little.
You overlooked income on your tax return.
You spent or deposited more than $10,000 cash
You claimed a lot of itemized deductions
You have investment income
You’re self-employed
You have cash or assets in other countries

What does audit protection mean?

Tax audit representation, which is also called an audit defense, is a service where a tax or legal professional stands on behalf of a taxpayer during an IRS or state income tax audit. To find out more about audit defense services, please visit: https://irstaxreliefnetwork.com/

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