The IRS is one of the most powerful agencies in the federal government. If you are notified that the IRS is auditing your finances, you might be anxious about what that means. Audits can have serious financial and personal consequences. When the IRS finds evidence of wrongdoing, they can have you pay back taxes along with interest. If they believe you willfully evaded your taxes by misrepresenting yourself on paper, they might choose to charge you criminally.
Because of how complex audits are, it’s important to talk to an experienced attorney. Attorneys can evaluate your financial situation and explain the severity of the potential penalties. Instead of immediately complying with everything the IRS tells you to do, talk to a lawyer right away. They will help you avoid being a victim of the fearmongering tactics that the IRS sometimes uses.
Different situations will require different strategies for defense. People will have different defenses as individuals than as business entities. The lawyer will examine the case facts and then present a defense to lower your owed taxes, lower your interest, and lower your penalties. They may also be able to get you an extended length of time to pay your owed taxes.
Most audits do not result in criminal convictions. The main goal of the IRS is to get their payment. But if you are charged, there’s a very good chance that you will be found guilty. The IRS does not charge people with criminal tax evasion unless they have significant evidence indicating that the defendant committed the crime.
There’s also a significant amount of resources that the IRS has at its disposal during an audit. In criminal cases, it’s vital that you work with a tax attorney rather than a CPA. CPAs are not as well versed in the court system, so they can’t give you an effective legal strategy. In some cases, your lawyer and your current CPA might work together on your defense.
Tax attorneys might offer several of the same services that your CPA does, such as ensuring legal compliance in complicated tax situations. They can also act as your legal representative when you are audited by the IRS or your state government. Some people might be at a higher risk of auditing than others. Being audited is not necessarily an indication that the IRS thinks you’ve willfully committed a crime, but it is an indication that they believe you might owe more back taxes.
It’s common for people to be audited when they live in one state but work in another. It’s also common for basic clerical errors or misunderstandings to result in an audit at the state or federal level.
Since tax attorneys frequently work in the federal and state systems, they can help you navigate this complex time. They’ll represent you when talking about your finances to the IRS. If you do need to speak to the IRS yourself, your lawyer will advise you about what to say. Their entire job is to minimize the potential harm done to your finances and life.
If you owe a significant amount of back taxes to your state or to the federal government, a lawyer can help negotiate your case. An alternative method of collection might help reduce your overall tax liability. But most average people don’t know a lot about the alternative options that are offered by the IRS.
Some of the options that might be available to you include:
If you are placed on a non collectable list, you will typically need to pay additional interest for the time you spend not making payments. However, you will be able to defer payment for a certain period of time.
There is no way to know why you have been personally selected for an audit. Most audits are not malicious. In fact, over 95 percent of individual audits happen because a software program used an algorithm that happened to flag your return. The reason for that is simply that you matched criteria the IRS considers red flags.
The IRS uses a DIF scoring system to evaluate how likely a person is to underpay their taxes. If your chances are higher than the average taxpayer’s, you’re more likely to be audited. That’s the case even if you’ve never had any tax problems in the past, and it’s not necessarily a guarantee that you owe back taxes.
Some tax attorneys have dual certifications as a CPA and a lawyer. This means that they are able to manage your accounting needs on a general level, and they can handle potential criminal penalties. Looking for a dual certified lawyer might be beneficial if your tax situation is complicated.
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