Audit Defense


Few things raise as much fear as being audited by the IRS.  Although the odds of being audited for most people are very, very small, a taxpayer should be concerned if the IRS commences an audit.  Why is that?  Because the consequences of an unfavorable audit can be so consequential.  An unfavorable IRS examination can include large increased tax liabilities, and penalties, and even a referral to the IRS Criminal Investigation Division (CID), should the audit uncover evidence of fraud, or should the taxpayer engage in fraud  during the examination.  Thus, it is critical that a taxpayer being audited by the IRS retain qualified counsel to manage the audit for the taxpayer to eliminate missteps and ensure the most favorable outcome.  It is also imperative for a taxpayer to hire qualified counsel to manage an audit to avoid the stress that would result from handling an examination of one’s own taxes.

According to the IRS, an IRS Audit is a review of an organization’s or individual’s accounts and financial information – a discussion and review of your financial situation to ensure you are complying with the tax laws and reporting a substantially correct amount of tax.  The IRS says it will ask you to present certain documents that support the income, credits or deductions claimed on your return, and that you would have used all of these documents to prepare your return. Therefore, the request should not require you to create something new.   Further, every audit purportedly focuses on certain aspects of a return, but the kinds of records the IRS will request will most likely be bills,  receipts, canceled checks, legal papers, loan agreements, logs or diaries, medical and dental records,  theft or loss documents, employment documents,  and Schedule K-1s.  However, according to the IRS, no record stands on its own, and you must also provide the circumstances surrounding any document you present.  The IRS may also require you to fill out a questionnaire, such as a Car and Truck Questionnaire, a Travel, Meals and Entertainment Expense Questionnaire, or a Repairs and Maintenance Questionnaire.

Although the IRS says that its document requests will relate to specific tax return items, very often that is not the case.  It is quite common for the IRS’s document requests to be irrelevant to the item being audited.  This results from poor draftsmanship, or ignorance of the activity giving rise to the income reported or claimed deduction.  A taxpayer’s counsel should certainly review all document requests to ensure their relevance, and necessity.

As noted above, according to the IRS, no record stands on its own, and a taxpayer must also provide the circumstances surrounding any document presented.  It is imperative that a taxpayer’s representative provide the proper context of any document or other evidence gathered by the IRS to ensure the IRS reachs the proper conclusion.  An IRS agent or examination team can easily draw an improper conclusion concerning the materials it gathers as a result of falling prey to conformation bias, or an incorrect interpretation of a document or other piece of evidence.   Very often the IRS simply has relied an an incorrect interpretation of the Internal Revenue Code.  Taxpayer’s counsel must ensure this does not transpire.  Further, taxpayer’s counsel must make all exculpatory materials are available for presentation to the IRS.

The attorneys of the Law Offices of Matthew I. Root have been involved in the most complex IRS examinations for over 30 years and are extremely qualified to make sure the taxpayer’s interests are protected and advanced during an IRS audit.