What Do I Do If I Lose My IRS Audit?
Have you ever wondered “What do I do if I lose my IRS audit?” I’ll tell you.
Hi, I’m Jeff Fouts, a tax attorney located in metro Atlanta, with a nationwide law practice helping clients who have serious IRS problems.
So, “What do you do if you lose all or part of your IRS tax audit?”
There are three basic outcomes of an IRS audit. The best outcome is when you win and the IRS says you don’t owe any additional taxes. But as we know, there are other possible outcomes.
Another outcome is if the auditor makes adjustments to your tax return, and you agree with the proposed changes. A third outcome is when the auditor makes adjustments to your tax return, and you don’t agree with the auditor’s proposed changes.
The last outcome is the one that happens most often if the IRS’ adjustments, or changes to your tax return, aren’t challenged, or if those adjustments are not challenged properly. I want to discuss what you do if you don’t agree with the auditor’s changes.
Upon the completion of your audit, your IRS Revenue Agent (auditor) will issue a written final audit report, called the Revenue Agent’s report, which lists any changes he has made to your tax return, along with discussion about each of those changes.
If you disagree with any of the auditor’s changes, you should consider taking the following steps:
1) You should request a meeting with the auditor’s manager to discuss the tax adjustments you are disputing. Be sure you have your supporting documentation and arguments ready to discuss with the manager. An audit manager has the authority to override an auditor.
2) If your meeting with the audit manager is not satisfactory, you need to decide if you want to appeal your audit results on up the ladder. If you have proof of your tax deductions or proof for your position, or if you have a reasonable way to recreate your expenses, then filing an audit appeal makes good sense. Filing an audit appeal transfers your case to the IRS Appeals Division. They will assign an unbiased, experienced audit appeal officer to review your backup documents and arguments. While there are no guarantees when dealing with the IRS, it is always an advantage to have an experienced IRS employee, like those who are the Appeals Division, take a second look at the argument you are making.
While I personally recommend you hire a tax professional as early in the audit process as possible, if you decide not to, it is imperative you hire a professional to file the audit appeal on your behalf whether you represented yourself during the audit itself or not. If you have lost all or part of an audit, the appeal process is very, very important to you because this may be your last shot at winning your audit.
An audit appeal must be filed within 30 days of the final audit report. One advantage of filing an appeal is that the appeal takes your audit challenge out of the office where the audit occurred. This is important because while an appeal to an auditor’s manager certainly has value and should be done, it’s also true that managers tend to not disagree with their employees’ audit report. The reality is that the Appeals office may be more receptive to your position. The main disadvantage to filing an audit appeal is the length of time it takes for the audit appeal to be scheduled.
3) You may be unable to locate your backup documents, or not have enough time to find them, even if the IRS gives you additional time to try to find them. It may take a lot of time to get the documents if you need to request the paperwork from your bank, customers, or suppliers. Another reason you may need additional time is to recreate mileage logs or appointment calendars. There may be any number of reasons why you believe your tax return is correct, but you simply cannot prove this to the IRS within the audit time frame.
If this should turn out to be the case, do NOT sign the final audit report. Continue working on getting your backup documentation while the IRS takes steps to assess your audit changes. Once the IRS has assessed these changes and the new tax debt shows up on your IRS Account Transcript, you can then request an audit reconsideration. An audit reconsideration is a special type of audit appeal. Its my recommendation you find a tax professional who understands how to request an audit reconsideration to handle this for you.
If you cannot afford to pay the proposed increased tax, the IRS will eventually assess the audit changes against you whether you agree with the changes or not. It will take the IRS longer to assess the changes if you don’t sign the audit report.
Once the IRS sends you a balance due notice, they will transfer your case to the Automated Collection System (ACS) to begin collection actions against you. You will need to analyze your situation to know what options you have to deal with your tax debt, for example, whether you qualify for an Offer in Compromise.
Since the IRS is paid to collect your tax debt, not to analyze your situation and let you know all the options you may have to possibly reduce your tax debt, an experienced tax professional can be valuable to you at this stage.
I hope this important video tip has helped you understand the IRS a little better and about how tax problems are solved. Chances are you have questions or concerns about your own particular tax problem. What I encourage you to do is pick up the phone and call me. I can answer your questions. Over the past 20 years I’ve represented clients in all 50 states and 29 foreign countries, and I welcome your call. You can reach me at (888) 995-6785 or by email at firstname.lastname@example.org. I’m Jeff Fouts and thanks so much for watching. Have a wonderful day.