Early American colonists adopted what is commonly considered their first slogan of “No taxation without representation”. While this slogan specifically regarded their requirement to pay taxes to Britain without having any political influence, it is still valuable, though in a different way, today.
Taxpayers in the United States
We have a Bill of Rights, which includes “the right to retain representation”. The ten rights contained in the bill are thus:
- The Right the Be Informed
- The Right to Quality Service
- The Right to Pay No More Than the Correct Amount of Tax
- The Right to Challenge the IRS’s Position and Be Heard
- The Right to Appeal an IRS Decision in an Independent Forum
- The Right to Finality
- The Right to Privacy
- The Right to Confidentiality
- The Right to Retain Representation
- The Right to a Fair and Just Tax System
You can read more about these rights here: https://www.taxpayeradvocate.irs.gov/get-help/taxpayer-rights/
As a taxpaying citizen, you have the right to authorized representation when dealing with the IRS. In this context, representation means someone working on your behalf with the IRS. This person must have your interests as their only objective. Most often this is accomplished in one of two ways
- Informally providing information to the IRS on your behalf
- This requires no designation or Power of Attorney.
- This does require your verbal or written authorization to your representative.
- Formal representation through the filing of a Power of Attorney.
- This requires a professional designation such an Enrolled Agent (EA), Certified Public Accountant (CPA) or Juris Doctor (JD).
- You must sign a Power of Attorney presenting them as your legal representation.
Now, it’s important we don’t get the term “legal” mixed up here. While a tax representative can be a lawyer, they are not inherently such. EAs and CPAs are both legally authorized to practice before the IRS. Just as important as the legal authorization to practice before the IRS is the ability of your representative to display mastery of doing so. Any competent representative should be able to clearly explain the issue(s) the IRS is addressing and what options are on the table to solve it/them.
IRS Audit Representation
Almost all levels of IRS scrutiny will begin with a notice sent to you in the mail. In very rare cases a revenue agent will knock on your door or call you on the phone, though these are not common. Negotiating with the IRS is so stressful, intricate, and wearing. The process can be aggravating and unclear. An experienced representative will know how to navigate these difficult waters.
A representative will handle it all for you so that you don’t have to take a leave of absence from your work or business to deal with the authority and documents of the IRS. No lost earnings or sales. You just send the notice of an audit to your representative, and they can act in your best interest.
Competent representation before the Internal Revenue Service can be critical, and having someone qualified to stand by your side is recommended when you’re concerned within tax controversy, like a tax audit, a legal issue that could lead to criminal prosecution, a disagreement with the Appeals Office, appealing for an offer in compromise, or filing a request for a refund.
When will I know if I need IRS representation?
The principal objective of an audit is for the IRS to make sure that they’ve obtained the right amount of tax from an individual or entity.
An audit might be required for some reason, though this is always the ultimate purpose of this investigation. You might get an audit notification randomly, while for certain circumstances, due to suspicious activity. Among the reasons that draw the interest of the IRS cover among other things:
When completing your tax return, don’t let yourself get preoccupied, neglecting to write down that last zero. Don’t accidentally write a 4 rather than a 9.
Rounding off your figures very evidently
Your financial records and your form 1040 may include numbers that most probably will not be in simple intervals. In case of this, you must avoid making estimates, though if needed, round off your entries into whole dollar amounts. If you decide to round any amount, you should use rounding on all forms and schedules you include with your return.
Too many reported losses
If you are your own boss, avoid registering your personal accounts as business accounts. Reporting too many losses may draw suspicions on how you’re able to maintain your business.
Claiming numerous charitable donations
Charitable contributions are excellent deductions. But if your charitable write-offs are overly massive compared with your income, it could draw attention. Don’t list fake contributions. If you don’t have the papers to show the soundness of your donation, don’t claim it.
It is necessary to understand that having representation is not an implication that you did something illegal. Having IRS representation saves you time and relieves the stress of needing to face the IRS.
Usually, the IRS provides deadlines in which problems should be resolved to avoid acquiring extra damages or audit penalties. If the IRS is disregarding your efforts to fix any error, you should hire a representative. They can compose your letters in a more straightforward approach that’s confirmed to have the IRS’s attention settle your problems in a high-priority way.
What can the IRS do if I ignore them?
The IRS will inform you via mail or phone call when you have been chosen for an audit. In these conditions, you may be tempted to disregard the notification and want the audit to disappear. Disregarding the IRS is the most regretful thing to do. The case will remain.
Failure to cooperate with IRS calls will lead to a vast IRS tax levy, which simply adds to your IRS tax issues. Here are some of the possible consequences of ignoring an IRS tax notice.
- Substitute for Return: The SFR is a bad deal for the taxpayer. The IRS gets whatever data it has regarding your income (from employer, banks, or other payers).
- Tax Revenue Officer Visit: You may get a sudden visit from an IRS Revenue Officer. This can be very alarming when they take you by surprise.
- Criminal Charges: Less than 2% of IRS audits result in criminal charges, especially if you fail to pay your taxes.
- Wage Garnishment: Percentage of your wages will be transferred to the IRS every pay period until you make other agreements to pay your overdue taxes.
- Asset Seizure: You might wake up one day to discover your bank account empty.
IRS representation can be crucial during an audit, and our expertise with tax officials allows us to give pointers to our clients in their concerns with federal and state agencies. When you have recently got an IRS audit notice or are worried that you may at any time be called by the IRS, then get in touch with us today.
Our team of experts can lead you through the audit process, rendering the best of assistance and help throughout. We may be able to analyze the audit for you and have your case settled and positioned to provide you with the assurance you deserve.
Tax Advisory Manager, EA