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IRS Audit Defense

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If you’re already one of our clients, you know this. We stand by our work, and support our clients if they face an audit from the IRS. An IRS audit is one of the most mystifying and scariest things out there; however, you need not be so afraid. In 99% of cases, it’s not a big deal. It’s often as simple as a paperwork discrepancy like an address error, a social security number error, or a small discrepancy in reported income. We live in a “computer world,” and you should realize that it’s the computers that decide who will get audited and why.

But here in San Francisco, we’re all techies (well, most of us), so it’s useful to think of the IRS audit system as an algorithm. Who gets selected for an audit and why? Here’s a summary of an excellent article in our April, 2017, San Francisco Tax tips as to factors increasing the likelihood that you’ll face an IRS audit.

  • Higher Income. No big surprise here. With income from $500,000 to $1,000,000, 3.8% of all returns are audited vs. just 1.5% of taxpayers as whole.  The IRS is “rational” and “goes where the money is,” higher income taxpayers.
  • Earned Income Credit. This is the reverse, or the exception that proves the rule. There is a fair amount of fraud about the Earned Income Credit, so if you claim it, then you’re more likely to face questions from the IRS.
  • Self-Employed Individuals, Especially those who are Sole Proprietorships. The IRS realizes that the self-employed have more opportunities to “cheat” or “be creative” with their deductions, so this increases your exposure to an IRS audit.
  • Doing Your Own Taxes. This is an interesting one. If you “do your own taxes” vs. “have a tax professional,” you are more likely to face an audit. This may also just be due to the fact that people who “do their own taxes” make more mistakes than professionals, thus triggering a “discrepancy audit” as it were.

Our goals for our clients is to get every possible deduction that is lawful, and have both the law and the facts on our side during a San Francisco IRS Audit defense. If you are facing an IRS audit, or have received a letter from the IRS, reach out to our office for a consultation. We’re convenient on Geary street, here in San Francisco.

Photo credit: free pictures of money via Foter.com / CC BY