Winning An IRS Audit
An audit is the IRS’s answer to the idea that income tax is based on the honors system. Normally you report your earnings and deductions on your income tax return, and send in the payment you owe based on your own calculations.
But if the IRS (or their highly secretive computerized rating system, the “Discriminate Function”) decides there might be an error on your income tax return, then you may face an IRS audit.
Winning an audit can be an uphill battle. You’re considered guilty until proven innocent, and it’s up to you to prove to the IRS that they are the ones who made a mistake.
Luckily, you have some specific advantages over the IRS personnel handling your case. We take a strategic approach to help you win an audit.
Audit-beating strategy 1: Take the high ground
Winning an audit may seem like you’re defying gravity. But a tax attorney can help you turn the tables so that the auditing agent has to constantly spend energy chasing you.
Your first line of defense for winning an audit is to delay. The IRS has already built their case against you by the time they notify you of an audit. But every delay gives you and your tax attorney time to prepare a defense.
The obvious first step is to make your appointment as far in the future as you can. Then, a few days before the appointment, have your tax attorney postpone the audit appointment. When you actually come to meet with the IRS agent, if you happen to “forget” a few documents or you don’t bring everything the agent wants, this is another excuse to drag the process out for a few more weeks.
Likewise, your tax attorney will know when the IRS is requesting documents that you’re not required to provide. This happens more often than you think. Some possible requests include tax returns from years that aren’t part of the audit, or financial documents belonging to a spouse.
The key to this tactic is being polite and cooperative, but not helpful. IRS agents often handle several cases at once, and they are under a lot of pressure to close these cases quickly. If you slow them down without giving them a specific reason to become more aggressive, it’s possible they’ll close your case and spend their time on easier prey.
Audit-beating strategy 2: Show the IRS the error of their ways
How will your tax attorney use the extra time that you gain? First, by going over the IRS claims with a magnifying glass and a fine-toothed comb—not to mention a calculator.
Tax collectors are known to make mistakes, especially when math is involved.
Audit-beating strategy 3: Keep the IRS on the straight and narrow path
Your tax attorney may uncover other kinds of errors made by the IRS. Aside from the basic arithmetic, the auditing agent may have applied the wrong rule, placed some of your income in the wrong category, or neglected certain deductions.
And it gets worse.
In addition to misinterpreting the tax law, some IRS agents may make a bigger mistake during an audit. They might simply act rude and abusive. You don’t have to take this, but you should take advantage of it.
If you’re being mistreated by an agent, you tax attorney can demand to speak to the auditor’s Group Manager. This is a way to immediately end the appointment, another delay in your favor. It also might get a different auditor assigned to your case, who might be busier, less aggressive, or more sympathetic.
At the very least, the new auditor may be unfamiliar with your case, and will have to start over from scratch.
Audit-beating strategy 4: Challenge the Examination Report
At the end of an audit, the IRS will send you an Examination Report. This is basically a summary of what the auditor discovered about your case, the conclusions regarding what you owe, and the bill.
If anything still doesn’t seem right, your tax attorney will call the auditor, dispute the findings, and ask what proof would be needed to change the results. Your tax attorney will typically request 30 days to provide the needed proof.
The auditor can refuse, but this may actually work to your advantage. The manager may be under pressure to close your case quickly. If your dispute is reasonable, and your tax attorney is persistent, you may be able to work out an agreement in your favor.
Most taxpayers are terrified of an IRS audit. Winning an audit may sometimes seem like an over-optimistic dream. But with the right strategy and a skilled tax attorney, it may be possible to win an audit.