Are you going to be audited by the IRS or your state’s tax agency? This is undoubtedly a stressful event for most Americans. And you have two choices for handling the matter. You can try to go it alone with the IRS or you can hire a tax professional for assistance. When should you avoid the DIY route and work with a trained tax attorney instead? Here are 5 clear indicators.
1. The Audit Is In Person
The IRS audits taxpayers in several different ways. The least stressful is a mail audit, which is conducted entirely through correspondence. However, both office audits and field audits involve meeting directly with the assigned agent. This can be intimidating for many people. You may not know how to answer questions, how to explain items on your tax return, or how to present your case.
If you worry you may not be up to a personal audit appearance, a professional can attend the audit meetings with you and conduct further correspondence with the auditor.
2. You Don’t Know What’s In Your Taxes
While most audits reveal that taxpayers may have made an error or failed to keep the proper records, sometimes there is a bigger danger. Did your spouse or ex-spouse file joint tax returns? Did a former accountant complete your returns? Can you attest to the accuracy of either? If not, you may need a professional to help you research your own tax returns or documents and avoid unnecessary liability.
3. Your Taxes Are Complex
Individual taxes for many Americans are relatively simple. But the more complicated your taxes, the more you need professional assistance to research or defend them at an audit. This often includes taxpayers who have a privately owned business, who reported a large asset sale or purchase, who are in the middle of a divorce, who have foreign income or exclusions, or who file multiple entities.
4. Large Dollar Amounts Are Involved
Most IRS notices for additional information focus on particular elements of the tax return. If you operate a sole proprietorship business, for example, you may just be asked to provide income and expense records for it. The audit may focus on a particular source of income or a specific deduction. So you should have an idea of how much money is involved in your particular case.
Small-dollar amounts, such as the home office deduction, may not be worth engaging a trained professional to argue your case. But as the amount in question grows, the financial risks of failing the audit grow. At this point, a tax attorney and accountant is a wise investment.
5. You Need to Negotiate
The good news for taxpayers is that the IRS is willing to negotiate in a variety of circumstances. The challenge is that you must successfully negotiate with professional agents. And most options — like an Offer In Compromise — generally don’t offer a second chance if your first negotiation doesn’t go well.
If your particular audit isn’t going to result in a complete vindication of your position, good negotiation may be the only way to get any financial relief. While an attorney is important if negotiations will involve a large dollar amount, their legal expertise is vital if your negotiations may involve any admission of wrongdoing or discussion of tax fraud charges.
If your audit may fall into any of these categories, you should learn more about the challenges you face. A qualified tax attorney has experience with audits of all types and scopes. They’ll work with you to find the best approach to minimize cost, stress, and legal issues. Kansas and Missouri taxpayers can rely on the experience of Wiesner & Frackowiak, LC. Call today to make an appointment.