Tax audits are, unfortunately, a possibility that every taxpayer should be prepared for. Even if you’ve crossed your t’s and dotted your i’s, the IRS does sometimes choose tax returns at random for an audit. How can you ensure you are ready if this happens to you? The more documentation you have to support the claims made on your tax return and the more understanding you have of the tax laws that apply to your case, the better you’ll fare. This is where the expert assistance of a Certified Tax Planner becomes invaluable.
Here are three of the top reasons you’ll want a tax planner in your corner if you receive an audit notice from the IRS:
1) You May Already Receive Audit Protection as Part of Your Tax Planning Package
Before you panic, check with your tax planner to see if they offer audit services—and if some level of audit protection is already included with your tax plan. Many tax planners offer audit support as an add-on service. Working with someone who is already exceedingly familiar with your tax return—and in fact crafted the logic behind it—can save you an immense amount of time and money. Part of the benefit of working with a tax planner is that they will already have collected the documentation you need to support your case before the IRS. Additionally, Certified Tax Planners receive ongoing training in the latest changes in tax law, the applications for tax savings, and even recent court cases that can help prove precedent for the claims on your tax return.
2) Your Tax Planner Can Help Protect Your Taxpayer’s Rights
Whether you’re in the middle of an audit examination, the IRS has moved to collection, or even if you decide to appeal the results of an audit, you have certain rights as a taxpayer during every step of the process. With their knowledge of tax law, Certified Tax Planners can help identify if those rights have been violated in some way. Though tax planners are not typically attorneys who are qualified to defend you if an issue goes to court, they can play the role of referee and blow the whistle if they see a “technical foul” or if the IRS goes out of bounds. If any rules of the game are violated, your tax planner will be ready to call them out and can potentially get the entire case thrown out because the IRS has not followed its own requirements.
With this in mind, your tax planner will be looking out for problems from the very beginning of the audit process. The IRS may make mistakes when it comes to how you were notified of an audit, when you were notified, how much time you were given to respond to notifications, and how they handled your responses. Your tax planner will also function as a detailed record-keeper, tracking calendars, upcoming due dates, notes on what has already been done in the process, and a log of what the required communication steps are. Having someone by your side to document everything and facilitate the necessary communications can save you a ton of time and headaches as well as provide proof that you have taken all the required steps.
3) Your Tax Planner Can Ensure the Audit is Accurate
If this is your first tax audit, you may assume that the IRS employees assigned to your case are experts, but in fact, many of them are lay people who may not even have extensive tax or accounting experience before coming to the IRS. Because of this or because of overlooked details on your return, the IRS may make an incorrect assessment and say you have a tax deficiency when there is none. This is where your tax planner can come in and actually better educate the IRS! A well-trained Certified Tax Planner can both identify inaccuracies in an audit and demonstrate using detailed documentation that you were in the right in how you interpreted the law on your tax return.
When dealing with the IRS, having your tax planner as a third-party mediator can also be helpful as a barrier to stress. You, as the taxpayer, may be tempted to get defensive if you speak with the IRS directly, and your attempts to explain your reasoning may get lost in the shuffle of heated emotions and misunderstandings. Your tax planner is in a better position to engage neutrally since they are not the ones being audited and to simply question, on the basis of tax law, possible errors the IRS may have made. That is their role: to defend your rights as a taxpayer and ensure the audit is accurate.
Take this real-life example for instance: A taxpayer had been working with a Certified Tax Planner and received an audit notice just before the COVID-19 pandemic hit. The tax planner prepared binders and binders of documentation for that audit, and the IRS auditor had all that documentation in his possession when the pandemic began, but months passed before he did anything with it. Finally, the auditor reached out to the taxpayer and asked them to sign a release to extend the statute of limitations—essentially to voluntarily give the IRS more time than is usually allowed for them to complete an audit.
Of course, the taxpayer turned around and asked the advice of their tax planner who definitively said, “No, don’t do that.” By law, the taxpayer was fully within their rights to decline that request, and the tax planner made sure the taxpayer was comfortable doing so. The auditor still attempted to issue a deficiency assessment, but the tax planner pushed back. When the tax planner asked the auditor to demonstrate the grounds on which the deficiency was based, the auditor admitted that he had not actually looked at any of the records, and he wasn’t going to have time to look at the records because the taxpayer refused to sign the extension of time! At the end of the day, the audit did not proceed, and the taxpayer did not face any penalties.
The tax planner’s approach here was fully within the bounds of the law. They were simply holding the IRS accountable for following the law and being accurate in their audits. By doing so, they were able to essentially get the case thrown out on behalf of their client.
Summary
Taxpayers may not realize that they have rights throughout the audit process or that they have permission to hold the IRS accountable if they overlook key details or fail to correctly apply the letter of the law. This is where the help of a Certified Tax Planner can make all the difference between a lengthy and grueling audit process versus a smooth defense process that could result in the audit being dismissed completely.
Your tax planner is here to help protect your rights, to educate you on what you can do to defend yourself in an audit, and if needed, to even educate the IRS if their audit is inaccurate. With a well-crafted and thoroughly-documented tax plan, there is no reason to fear an audit—and there is every reason to believe you can win. To begin creating your own tax plan and receive expert help in preparing against an audit, reach out to a Certified Tax Planner today.
