No one wants to have to get into more dealings with the taxman than necessary, but should an audit be initiated by the IRS, or actions from them such as liens or wage garnishments, then your next step is critical. Your right to retain IRS representation is a fundamental right, set out in the IRS Taxpayer Bill of Rights. You could move forward solo and attempt to respond to and challenge IRS actions by yourself, allowed under the Department of Treasury Circular 230, which states that individuals may represent themselves subject to the presentation of satisfactory ID. Often, this is in the interest of the IRS, as dealing with taxpayer representatives can impede the process.
Or, you can exercise this right and appoint representation. IRS representation provided by a professional with a strong background in the sector will help you navigate the process as well as give you the reassurance that your issue will be negotiated and settled by someone seeking to protect your assets as best possible. Professionals qualified to represent individuals and businesses in tax cases include CPAs and enrolled agents (EAs), requiring a simple power of attorney to assign them the right of representation. Alternately, those with insufficient funds to engage the services of a CPA or EA may turn to the Low Income Taxpayer Clinic Program. Those who meet the income ceiling criteria set by the IRS are offered free representation in tax controversies.
By retaining a professional for IRS representation, all communications from the IRS will be routed to your representative, relieving the stress and burden. You won’t have to take any calls from them, or personally respond to any more correspondence sent to you, and even meetings with the IRS can be handled by your representative. Under Internal Revenue Code Section 7521(c), as long as no administrative summons has been issued, a fully authorized representative can meet with the IRS agent for an interview without the taxpayer’s presence required.
Think about it like this – disputing your own IRS case without representation is akin to going to court without an attorney, it’s just not going to give you the optimum result. A qualified and experienced CPA or EA knows what to expect from the IRS, the nuances of their communications, and how best to deal with them. A professional who has experience of dozens, if not hundreds, of audits will understand the full implication of inquiries from auditors, which the taxpayer is unlikely to be aware of. An experienced CPA is more likely to be able to ensure the audit is concluded swiftly and without the audit scope being expanded any further.
Are you at risk of being audited? What might trigger an IRS audit? There are several items on your tax return that increase the likelihood of an audit. If the income amounts from W2 and 1099 forms issued to you do not align with what you report on your tax return, it will raise questions with the IRS. Those with higher incomes are somewhat more likely to be audited. Uncharacteristically high deductions, based on your previous returns or compared to your industry, may lead the IRS to require further explanation on these. A deduction for the business use of a vehicle or a home office may be further scrutinized by the IRS to ensure that there is a valid basis for these deductions. You need to be able to substantiate what is presented on your tax return.
If you’re unlucky enough to be selected for audit, IRS representation by a qualified CPA means the process will be managed by a professional who can properly respond to the IRS requests for information and documentation, review IRS queries, and carefully craft appropriate responses to obtain the most favorable outcome.
