If I am handling the case for you, and it’s a field audit, I always
try to have the audit take place at my office; I have a desk where the
auditor can sit and do their work undisturbed. That way, if they have
a question, they can just walk across the hall and talk to me.
Again, the taxpayer is not involved in that directly; the auditor can go
through the documents and If they have any questions, I’ll answer
them, and if I can’t answer, I’ll go to the taxpayer and ask
them the question and back and forth along those lines. Eventually, we
will reach a point where either there are no more documents or they’ve
got all the information available and they’re going to propose a result.
They’ll discuss it with me and if I think that’s as far as
we can take the matter and there’s no point discussing it further,
I’ll just say, “Okay, put it in writing,” and they will
put it in writing. At that point, it’s just a proposal and the taxpayer
has the opportunity to respond or to object. If need be, we can go to
the auditor’s supervisor and object for whatever reason, if we think
the auditor is being unreasonable.
If it’s a correspondence audit, it works pretty much the same way;
there’s a back and forth with documents and other types of communication
and at some point, there’s a proposal that’s reduced to writing
and the taxpayer has the opportunity to informally object.
Let’s say there’s a discussion with the supervisor. The supervisor
says, “Okay, this is my position. That’s the end of it.”
Then you’ll say, “Okay, write it up and we’ll take it
to appeal,” and you’ll start the formal appeals process. Technically
the end of the audit comes when they write up the audit and you’ve
made all of your informal objections to the auditor and the auditor’s
supervisor. Then they write up a formal audit report.
What Happens When You Request An Appeal?
If you don’t want to request an appeal, you can do a couple of things.
You can just agree to the report and that’s the end of it; eventually
the IRS will send you a bill or you can even pay them in full if that’s
what you want to do. In some cases, that will make sense, because eventually
there will be interest, and the interest starts building from the day
your tax payment was initially due.
By the time you get audited, it will usually be a year or more after you
filed your return, so there will already be some interest and that just
builds every day. Once you see the results of the audit, you might say,
“Well, yeah, I guess the IRS is right and I’m wrong; I just
want to pay this and get done with it and reduce the interest.”
In some cases, that’s the way to go; you agree to the audit, you
pay and that’s it, you’re done.
If you don’t want to do that you’ll get what they call a 90-day
letter, which is also called a Notice of Deficiency, or NOD. That’s
a very significant letter, because it’s telling you that you have
90 days to file a petition with the Tax Court.
If the 90 days passes and you don’t file a petition with the Tax
Court, then you’re pretty much done with it; the only way to fight
the audit once the 90 days passes is to pay the tax, interest, and penalties
that were owed as a result of the audit and then go to regular federal
court and essentially sue for a refund.
The great advantage of Tax Court is, you can go there and file a petition
and you don’t have to pay first. You can just file your petition
and get to be heard by a judge without having to pay all of that money upfront.
Another potential advantage of Tax Court is you get a judge who knows the
tax law, because all they hear are tax cases. That can be very advantageous,
particularly if you have a complicated case.
For more information on
Stages of An Audit, please call
(510) 444-4430 today to schedule a free initial consultation. Get the information and
legal answers you’re seeking.