An IRS Audit can be a very scary thing. (If you are facing an IRS Audit, contact us immediately for a free phone consult). Everyone fears the IRS, often without good cause. The government is doing its job of collecting taxes in a fair way; our job as a leading San Francisco CPA firm is to help our clients support all legal and legitimate defenses against IRS audits. But like so many things in life and business, an IRS audit follows a series of relatively predictable steps. Understanding the steps helps you understand the process and have a better defense.
Common Steps in an IRS Audit Defense
Most people, including many CPAs, miss the first step of an IRS audit: the triggers. As a leading San Francisco CPA firm, we strive to minimize the tax implications for our clients and we work hard to avoid an IRS audit in the first place. Audit triggers can be as simple as your W2’s for income disagreeing with the income reported on your tax forms; or 1099’s about your business income being vastly different from actual business income. Being overly aggressive on automobile deductions can also be a trigger. So, we work hard with our clients, to minimize the risk of audits by pro-actively working with our clients on the kind of efficient, supported record keeping that the IRS prefers.
The IRS Letter. Most IRS audits (and IRS audit defenses) start with written correspondence. The business owner or individual receives a request from the IRS for an examination of an open tax year. Many IRS audits begin and end shortly with this initial query letter followed by a taxpayer response. It is important, of course, to respond correctly and have records to substantiate your income / expenses – which is where Safe Harbor CPAs comes in to assist in your IRS audit defense.
Documentation. Once you have received a letter, we recommend that you meet with a professional CPA firm in San Francisco that specializes in IRS audit defense. There we go over the IRS requests, the tax issues, and the supporting documentation that we need to substantiate your tax position.
Response by Mail. In many situations, we respond by mail or electronically to the IRS audit. This may be sufficient, and at that point the IRS will either accept our tax position, request for clarification, or deny our tax status.
Response in Person. In some situations, the IRS will send a representative to meet with you and your CPA to discuss the audit issues. We can be at your side during the IRS audit defense and help you understand the very technical tax issues and record-keeping practices that may or may not occur.
Appeal. Assuming that you are not satisfied with the ultimate IRS decision, you may want to work with us to appeal the decision before it heads to collections. As CPAs, licensed to practice before the IRS we are often times able to facilitate a better outcome for the taxpayer.
Summing Up: Steps of an IRS Audit Defense in San Francisco
Whether they occur in San Francisco, or anywhere in the United States, IRS audits go through a series of defined steps. We at Safe Harbor CPAs help our clients avoid and if not avoid, survive, an IRS audit.