IRS Audit Representation

In wake of the IRS’s recent crackdown on the foreign financial interests of US citizens, expats are a prime target for audits. Auditors demand extensive documentation to prove citizenship, filing status, dependents, foreign wages, interest, dividends, rents, royalties and capital gain/losses, as well as bank statements to ensure that a taxpayer does not have additional sources of income that he failed to report.

An individual does not have to communicate with the IRS directly. The IRS allows a taxpayer to be represented by an attorney, certified public accountant or an enrolled agent. To help a taxpayer navigate through the overwhelming paperwork and rules and regulations, we highly recommend the use of an experienced professional.

If selected for audit, your case will be sent to the examination department of the IRS. You will receive a detailed audit letter in the mail with an information document request outlining all the supporting documentation that needs to be provided. All documents must be submitted by the requested due date. Since various alternative supporting documents can be used, we recommend consulting with a tax professional to help decide which documents should be presented to ensure smooth acceptance.

If all documents are submitted in a timely manner and the supporting documentation proves the issues being audited, the IRS will send a letter accepting the original tax return as filed and the audit is over!

Sometimes, IRS may propose to adjust the return based on the evidence received. If the adjustment is agreed upon by the IRS and the taxpayer, the taxpayer signs the proposed adjustment and sends it back to the IRS by the due date. If the taxpayer does not agree then a telephone conference with an examiner can be requested. If both sides still cannot reach an agreement, the taxpayer can either request to speak with a manager or have the case sent to Appeals.

Appeals Process:

The Appeals Office is independent from the examination department. Form 12203 should be completed and a legitimate reason for appeal, supported by tax law, should be provided. When the IRS receives your request for an Appeals conference, the Appeals department will contact you to arrange a conference call. The Appeals department attempts to settle disagreements informally and promptly.

Petition to US Tax Court:

If you cannot reach an agreement with Appeals or you fail to respond at any stage in a timely manner, the IRS will send the taxpayer a Notice of Deficiency. An individual has 90 days from the date on the notice to petition to tax court. If an individual fails to petition on time, the tax will be assessed.

If the petition is received in a timely manner, the US Tax court will assign a trial date. Once thecase has been assigned to an IRS tax attorney, the petitioner, or their power of attorney, should reach out to the IRS’s attorney to try to reach a basis for settlement of the court case.

Our Experience and Success:

Expat Tax CPA’s has helped thousands of taxpayers over the last decade navigate through the complicated and unpleasant task of an IRS audit. Through these many cases, we have obtained an enormous amount of experience with all stages of IRS audits and have been able to achieve great results for our clients on the audit level, appeals level, and settlements in tax court. We have also amassed a world of experience and have had a very high success rate with offer in compromises-doubt as to collectability and doubt as to liability, and audit reconsiderations.  With all of this said, it is important that the related tax returns are filed accurately and professionally in order to ensure that if an audit does happen, that you will pass the audit with flying colors!