A tax professional plays a critical role during an IRS audit by providing guidance, expertise, and representation. Here’s how a tax professional can assist throughout the audit process:
Reviewing the Audit Notice and Explaining the Audit Process
Tax professionals, such as enrolled agents, CPAs, or tax attorneys, help interpret the audit notice. They’ll explain what part of your return is being audited and what specific documents the IRS is requesting.
There are several types of audits that vary in complexity. Whether it’s a correspondence audit (handled by mail), an office audit (in-person at an IRS office), or a field audit (in-person at your home or business), a tax professional will explain what to expect and anticipate the process requirements. They will guide you through the process and provide a line of site to the conclusion of the audit.
Gathering and Organizing Supporting Documents
Tax professionals ensure that you gather all the necessary documentation (receipts, invoices, tax forms) to support the items under audit, such as income, deductions, or credits. Often, many requested documents need to be reconstructed, which the professional can assist with creating. Then, they can help you organize and present these documents in a clear, structured way, which can streamline the audit process and prevent unnecessary delays.
Communicating with the IRS on Your Behalf
Once hired, the tax professional can file Form 2848, Power of Attorney and Declaration of Representative, to handle communication with the IRS for you, reducing your stress and ensuring that the right information is shared. Tax professionals are experienced in dealing with IRS auditors and can negotiate effectively, often helping to streamline the process and anticipate IRS requests.
Providing Guidance and Expertise
The tax professional has a deeper understanding of IRS regulations and requirements during the audit process. They also have a deeper understanding of your rights and your specific situation. They are the connecting point between understanding the IRS and understanding your situation.
They can help you spot errors on your return that may have triggered the audit and provide advice on how to address them. They ensure you understand your rights as a taxpayer, such as the right to appeal the auditor’s findings if you disagree.
Mitigating Additional Penalties and Interest
Tax professionals can communicate on your behalf for the reduction or abatement of penalties. For example, if there’s a reasonable cause for a mistake, they can present a strong case to waive penalties such as accuracy-related or late filing penalties. They help clarify the tax issues under audit and, where possible, reduce any additional tax liabilities proposed by the IRS.
Representing You in Appeals
If you disagree with the audit findings, a tax professional can represent you in an appeal with the IRS Office of Appeals. They will prepare a formal protest letter and present your case to an appeals officer. They will follow up with the IRS as well to monitor your appeal.
In cases where the audit results remain unfavorable after the appeals process, a tax attorney is solely qualified represent you in U.S. Tax Court.
They can also provide post-audit tax advice to avoid similar issues in the future, helping you understand what led to the audit and how to stay compliant.
Tax professionals play a vital role in navigating the audit process by representing your interests, reducing penalties, clarifying complex issues, and helping you comply with IRS requirements. Their expertise ensures that your audit is handled efficiently, minimizing your tax liability and reducing potential stress.
