Facing an IRS audit – Now What?
The most common mistake by a taxpayer facing an unexpected IRS audit is to fail to contact a tax professional to at the very least sort out the preliminary issues the taxpayer will encounter. Upon receipt of an IRS audit letter designating a preliminary determination of a deficiency, the taxpayer should immediately notify a tax professional.
A tax professional will make a proper assessment of the legitimacy of the deficiency notice and the avenues to defeat any erroneous assessments by the IRS. Unfortunately, most taxpayers wait until their rights to dispose of the matter have been severely altered due to the statutory window to petition the Tax Court for a redetermination. Below you will find important notices that trigger the timeframe for a taxpayer to petition the Tax Court. By contacting a tax professional when one of these notices below is received, all taxpayer’s right can be preserved and improper tax assessments can be reduced.
Proposed Adjustments – “30-Day Letter”
This letter notifies the taxpayer that the IRS reviewed their tax return and proposes adjustments. The taxpayer may either pay the amount due or they may appeal the adjustment. The adjustments in this letter can be appealed within 30 days from the date of the letter. The IRS Office of Appeals has more flexibility than the auditor, so an appeal may result in reducing or eliminating previously assessed taxes and penalties.
However, without proper representation, the Internal Revenue Code can be too tough to navigate to achieve a favorable outcome even at the IRS Office of Appeals. A taxpayer must not ignore such notices. Furthermore, a taxpayer likely will find favorable result by contacting a savvy tax professional that has experience with the Tax Code to help reduce their tax liability by negotiating with the IRS Office of Appeals.
Statutory Notice of Deficiency – “90-Day Letter”
If the IRS’s initial proposed adjustments go unpaid without submission of a request for appeal, a Statutory Notice of Deficiency will be issued. This notice provides the taxpayer with notice of the IRS determination and their right to petition the Tax Court to dispute the IRS determination. The notice will further provide a description of the additional tax owed. This determination will include any penalties and interest beyond the initial liability.
If a Statutory Notice of Deficiency is received, it is imperative that the taxpayer contacts a trained tax professional. A tax professional can assess the taxpayer’s situation and construct a strategy to dispute the assessment in Tax Court; however, if the taxpayer waits too long, the right to petition the court will be waived.
By contacting our office when receiving a Statutory Notice of Deficiency, we will be able to determine your best course of action. Upon close analysis of the facts and circumstances of a taxpayer’s situation, our attorneys can advise if legal representation is necessary and in your best interest.