Win Every IRS Audit – 5 Steps
If you are being audited, you may not know what to do next. You may consider hiring an attorney, or you may consider representing yourself.
Today let’s discuss the five steps to winning every IRS audit. Take note: These steps you can not do on your own. For your best results, especially if your business is being audited, you need to hire an expert.
Important: Also, note that your accountant is not the best person to represent you in an audit. There is a certain structure to successfully handling an audit. It is unlikely that your tax accountant will have the necessary experience or training.
Step # 1
Prepare and gather your audit “work product.” This includes source documents like bank statements and credit card statements. It also includes various financial documents to be presented as evidence during the audit. Work product becomes the bones that build the story you tell the IRS.
Work product consists of 6 items:
- Source Documents
- General Ledger
- Profit and Loss Statement
- Balance Sheet
- Proforma (Sample) Tax Return
- Reasonable Cause Statement
Step # 2
The Pre-Interview. This step is critical. Your attorney will conduct an extensive detailed pre-interview with you (the taxpayer), covering your financial background. This includes your business’s net income, net assets, accounting process, and so much more.
This pre-interview is the prior preparation that gets the best results when it’s time to meet with the auditor.
Step #3
Prepare a Reasonable Cause statement. This is essentially your best legal argument that some or all of your penalties should be removed.
A Reasonable Cause statement is structured and technical. There are many components. Our most successful Reasonable Cause statements range from 4 to 12 pages in length.
Remember: These requests are legal arguments. Only an experienced tax attorney can get the best results.
Step # 4
The “Audit Football.” Imagine a collection of critical source documents, financial statements, legal arguments, and audit strategy, all assembled and ready to execute like a professional football play. The “audit football” is not just the documents – it is the overall game plan.
Your attorney will prepare and organize all documents in either hard copy or PDF form and ensure they are ready to be presented to the auditor.
Step # 5
The IRS Audit Interview. Just like with the pre-interview, prior preparation makes all the difference.
CAUTION: An unskilled representative almost always hurts your case, not helps your case. For example, that person could provide incorrect information or inconsistent information. Even worse, the inexperienced representative could provide unnecessary information. It’s essential to have an attorney who is experienced in handling tax law and procedure.
Being audited can expose you to legal risk. An experienced attorney can protect you and your business.
If you are being audited, contact Tax Law Offices today. We know how to win IRS audits!