When you’re faced with an IRS audit in Orange County CA, it’s essential to take swift and meticulous steps to undergo the situation effectively. Upon receiving an audit notice, your first move should be to thoroughly examine the notice to understand its scope and the information being requested. Gather all relevant financial records, tax documents, and receipts that may be pertinent to the audit. It’s also highly advisable to seek the counsel of a seasoned legal tax professional who can guide you through the process and represent your interests.

At Ronald Arthur Stearns Sr. PLLC, we have comprehensive knowledge of the critical actions you should take if you find yourself subject to an IRS audit in Orange County CA. We aim to arm you with the necessary knowledge and strategies to approach the audit confidently and to highlight the importance of assistance in these circumstances. Don’t wait to get the representation you deserve. Call us today at 949-676-7193.

Understanding the IRS Audit Process

An attorney writing at his desk.The term ‘IRS audit’ might send shivers down your spine, but it’s simply a review of your tax return to confirm the accuracy of information. The four main types of audits conducted by the IRS are:

  1. Correspondence Audit: This type of audit is the most common and least complex. It typically deals with simple issues that can be resolved through mail communication, such as missing documentation or small discrepancies.
  2. Office Audit: A bit of a step up, this audit involves in-person meetings at an IRS office. It’s generally for more complicated tax issues that require a detailed review and discussion with an IRS examiner.
  3. Field Audit: The most comprehensive form of audit, a field audit involves an IRS agent coming directly to your home, place of business, or accountant’s office to conduct an in-depth review of your financial records.
  4. Taxpayer Compliance Measurement Program (TCMP) Audit: This is an intensive audit where the IRS conducts a line-by-line review and requires full validation of every item on your tax return to update their data for improving audit selection algorithms.

The selection process for these audits combines random sampling, computer screening based on scoring systems, and reviewing information linked to other audited entities. If this process involves a request for specific documentation to support your tax return, responding appropriately is key to avoid further complications.

Factors That Trigger an IRS Audit

There exist several factors that can instigate an IRS audit. These include math errors, implausible information, and a high Discriminant Inventory Function (DIF) score. If you’re a high-income taxpayer, have discrepancies in income reporting, or claim unusual deductions, you might be more likely to face an audit. Income discrepancies, in particular, can significantly factor in triggering audits, and such cases can potentially be managed by legal representation.

Amended returns are likely to draw an audit as they often contain rapid corrections to previously filed tax returns. Even your hobbies can come under scrutiny if you claim hobby-related deductions, as these might improperly reduce taxable income and thus raise audit risks. Utilizing Schedule C for reporting earnings or losses from a small business may help avoid triggering an IRS audit.

How the IRS Selects Taxpayers for Audits

A statistical formula, involving random selection and computer screening, is utilized by the IRS to select tax returns for auditing. Variables like your zip code, occupation, income, and expenses are taken into account in the IRS’s computer-generated score known as DIF to assess tax return compliance.

Additionally, your financial transactions with other taxpayers who have already been audited can flag your return for review due to the interconnected nature of financial reporting. Understanding this selection process can equip you with the knowledge to take on any potential audits with relative ease.

Typically, individuals and entities may be selected for IRS audits based on a variety of factors. These can include discrepancies in reported income, excessive claims for deductions or credits, and high Discriminant Inventory Function (DIF) scores which indicate potential for non-compliance. High-income taxpayers, those who file complex or large returns, and those who have transactions with other parties under audit may also be more likely to be chosen for an audit. Random selection also plays a role, meaning that any taxpayer could potentially be audited regardless of these factors.

Steps to Take After Receiving an IRS Audit Notice

Once you receive an IRS audit notice, careful review is necessary to comprehend why your return is under examination and the specific documents needed. Next, it’s important to determine whether the audit will be conducted by mail or in person, as this influences the steps you need to take.

The IRS provides tools like the ‘Did you get a notice from the IRS?’ tool and the Taxpayer Roadmap to help clarify the notice received. Locating and organizing all relevant financial, tax, and other documents needed for the audit process is an essential preparation step.

Finally, before responding to the notice, make sure to confirm its legitimacy, as the IRS does not initiate contact through phone, email, or social media.

Responding to the IRS Audit Notice

Responding to an IRS audit notice requires attention to detail. Read the entire IRS audit letter to comprehend the specific information or documents being requested. The notice will include details on how to respond appropriately, possibly involving the completion of certain forms or collection of supporting documents.

A tax attorney can play a pivotal role in interpreting the often complex language of an IRS notice. They can help you understand the elements of the notice, such as the reason for the audit, the specific tax years under review, and what documentation you will need to provide. A tax attorney’s background in tax law allows them to explain the implications of the audit and any potential issues with your tax return. They can also advise on the appropriate steps to take in response to the notice, ensuring that you meet all deadlines and comply with IRS requirements, which can be crucial for a favorable outcome. By translating IRS jargon into understandable terms, a tax attorney can demystify the audit process and provide peace of mind during what can be a stressful time. This is why an adept attorney like Ronald Arthur Stearns can be an invaluable asset for your tax law journey.

If you dispute the claims made by the IRS, craft a response letter detailing specific reasons for the dispute and referring to supporting evidence. Mail back the response letter, along with all supporting records and the detachable portion of the IRS notice, to the IRS at the address provided in their correspondence.

Protecting Your Rights During an IRS Audit

While undergoing an IRS audit, remember that you are entitled to certain rights. For instance, you have the right to representation and can hire a tax attorney to assist you during an audit. An experienced tax attorney can handle the filing of returns and document submissions, potentially preventing errors during an audit response.

Tax attorneys utilize their in-depth knowledge of tax law to interact effectively with IRS auditors and apply the law in ways that can benefit you. Representation by a tax attorney also shields you from potential intimidation or dishonest behavior by IRS agents.

Right to Representation

You are entitled to employ a representative for assistance during an IRS audit. Authorized representatives can include attorneys, certified public accountants (CPAs), or enrolled agents.

A tax attorney or legal tax professional can:

  • Navigate the tax code effectively
  • Provide a robust defense against auditor overreach
  • Use their legal experience and negotiation skills to protect your rights and ensure you’re well-represented during IRS audit situations.

Challenging the Results of an IRS Audit

Should you find yourself in disagreement with the results of an IRS audit, you are entitled to challenge them. You can seek an audit reconsideration, and obtaining legal representation can aid in achieving more favorable results. To initiate an audit reconsideration, you must provide additional information or clarify why the IRS’s findings are disputed.

Alternatively, you can file a petition in Tax Court, which requires providing detailed information such as the notice’s mailing date and the tax years affected. Our firm, Ronald Arthur Stearns Sr. PLLC, can provide professional assistance in preparing and filing Tax Court Petitions for clients, which can be crucial for successfully challenging IRS decisions.

The IRS Appeals Process

Filing a formal appeal with the IRS Office of Appeals is the first step to initiating the appeals process for tax disputes. This step is essential for seeking resolution and addressing the disagreement with the tax assessment. For cases involving larger disputed amounts or bigger tax issues, you must submit a written protest letter to the IRS.

IRS lawyers can assist with the process by helping you present your case, provide supporting documentation, and negotiate or explore alternative solutions.

Going through the appeals process with the assistance of a tax attorney can increase the chances of a favorable resolution. Let Ronald Arthur Stearns Sr. PLLC fight for your rights.

How Ronald Arthur Stearns Sr. PLLC Can Assist You

An IRS audit can be daunting, but with the right guidance and representation, this process can be effectively handled. Ensuring proper documentation, hiring a competent tax attorney, understanding your rights, and challenging unfavorable audit results are all crucial steps in this process. At Ronald Arthur Stearns Sr. PLLC, we’re committed to providing comprehensive assistance every step of the way, ensuring your rights are protected and your tax issues are effectively addressed.

We extend a range of services to aid clients confronted with tax issues. We provide Audit Defense services, representing clients throughout the entire audit process, potentially saving them time and money.

We can also assist with Offers in Compromise, negotiating with the IRS to settle tax debt for less than the amount owed. Our legal counsel can advocate for your needs, potentially negotiating a reduced tax bill or more favorable payment terms.

We want to be your advocate. To get started on your road to justice, call us today at 949-676-7193.

Services Offered by Our Firm

Comprehensive tax assistance is provided by our firm. Some other services our firm offers may include:

  • Audit Defense – Providing representation and guidance through the IRS audit process to ensure proper adherence to tax laws and to minimize potential liabilities.
  • Appeals – Assistance in challenging IRS decisions, including representing clients before the IRS Office of Appeals to negotiate and resolve tax disputes.
  • Independent Contractor Audits – Support for audits concerning the tax status and filings of individuals classified as independent contractors.
  • Federal Tax Lien Appeals – Representation and advice for appealing against federal tax liens, helping to protect clients’ assets and resolve tax issues.
  • Tax Bank Levy Releases – Assistance in releasing bank levies imposed by the IRS, providing clients with access to their financial assets.
  • Passport Revocation Appeals – Help with appealing the revocation of passports due to tax-related issues, aiming to restore clients’ international travel privileges.
  • Collection Due Process Appeals – Guidance through the process of appealing collection actions taken by the IRS, such as levies and liens, to ensure fair treatment and due process.

We negotiate with the IRS for Installment Agreements, Offers in Compromise, and Partial Pay Installment Agreements, facilitating manageable solutions for tax debts. We also assist clients with Penalty Abatement requests and help manage federal tax liens and other tax liabilities such as achieving Currently Not Collectible status and ensuring adherence to the Statute of Limitations.

We recognize that compliance with tax laws is key, and to this end, we provide assistance in preparing Unfiled Income Tax Returns. At Ronald Arthur Stearns Sr. PLLC, we’re committed to providing comprehensive Internal Revenue Service Tax Law assistance, from Collection Defense to Accounting & Bookkeeping services, with the help of our skilled IRS Tax Lawyer.

Preventing Future IRS Audits

You can save yourself significant stress and potential financial impact by preventing future IRS audits. Here are some steps you can take to minimize the likelihood of an audit:

  • Ensure that all government-issued forms like 1099-INT and 1099-DIV match the figures reported on your tax return.
  • Fill out your tax return completely without leaving any sections blank.
  • Itemize deductions with clear detail.
  • Use exact numbers rather than rounded figures.
  • Carefully report all expenses.
  • Sign the tax return.

By following these steps, you can maintain consistency, prevent discrepancies, and reduce the risk of an audit.

Keeping meticulous records is vital for several reasons, particularly when it comes to tax matters. Firstly, well-organized records can provide evidence of your financial history, which is crucial during an IRS audit. They serve as proof of income, expenses, and tax deductions claimed on your tax return.

Accurate record-keeping also simplifies the preparation of your tax returns. Having all necessary documents at hand makes it easier to fill out tax forms correctly and can help ensure that you claim all the tax deductions and credits to which you are entitled.

In case of discrepancies or disputes with the IRS, your records are your first line of defense. They can help you explain and justify any item the IRS may question, potentially averting additional taxes, penalties, or interest.

Furthermore, keeping records can aid in tracking your financial progress over the years, helping you make informed decisions about budgeting, investing, and retirement planning. It also provides a clear picture of your financial health, which can be beneficial when applying for loans or credit.

Lastly, in the unfortunate event of natural disasters or other catastrophic events, having a thorough record of your assets can prove invaluable for insurance claims and federal disaster assistance.

Overall, maintaining detailed and accurate records is a cornerstone of sound financial management and can significantly reduce the stress and uncertainty associated with tax audits and financial planning.

Filing tax returns punctually and avoiding late submissions can establish a track record of compliance, decreasing audit prospects. Limit the submission of amended returns to when absolutely needed, as extensive modifications can raise red flags and increase audit risk.

Frequently Asked Questions

What are the chances of being audited by the IRS?

The chances of being audited by the IRS vary depending on several factors, including the intricacies of your tax return, your income level, and the types of deductions or credits you claim. Generally, the audit rate is relatively low, with less than 1% of individual tax returns being audited each year. However, taxpayers with higher incomes or those who file returns with large, unusual, or questionable deductions may have a higher chance of being selected for an audit.

What steps should I take if I disagree with the IRS audit findings?

If you disagree with the findings of an IRS audit, you have the right to challenge the outcome. You can request an audit reconsideration by providing additional documentation or evidence that supports your position. It’s also possible to appeal the audit decision by filing a petition with the Tax Court or through the IRS Office of Appeals. Engaging a tax professional, such as a tax attorney or CPA, can provide guidance and representation throughout the process, ensuring that your case is properly presented and your rights are protected.

How does the IRS select taxpayers for audits?

The IRS selects taxpayers for audits using a statistical formula, which includes random selection and computer screening. This helps them identify returns that may need further review.

How can Ronald Arthur Stearns Sr. PLLC assist me?

Ronald Arthur Stearns Sr. PLLC can help you with Audit Defense, appeals, negotiating with the IRS for installment agreements, Offers in Compromise, and Penalty Abatement requests, providing comprehensive assistance in tax-related matters.

What should I do if I can’t afford to pay the amount due after an IRS audit?

If you’re unable to pay the full amount due after an IRS audit, you have options. You can apply for an Installment Agreement that allows you to pay over time. Alternatively, you may qualify for an Offer in Compromise to settle your tax debt for less than the full amount owed. It’s important to act quickly and consult with a tax professional to explore the right course of action for your specific situation.

What should I do if I receive a notice of intent to levy from the IRS?

If you receive a notice of intent to levy from the IRS, it means the IRS is planning to seize your property or assets to cover your tax debt. It’s crucial to act promptly. First, review the notice to understand the details of the debt. Then, consider contacting a tax professional or attorney for advice and representation. You may want to explore options such as setting up an installment agreement, filing an appeal, or proposing an Offer in Compromise. Taking immediate action can help prevent the levy and potentially resolve the tax issue.