Tax Audit Defense: Why Work with a Tax Attorney?

When you file your income tax return, the last thing you expect is an audit a few months (or years) later. Unfortunately, the IRS can randomly or intentionally select certain people's tax returns for an audit.

Even if you had an accountant or CPA do your taxes, you can still face an audit. The IRS may want to review your return or uncover mistakes or possible fraud. You may not even know the real reason for the audit. Either way, you cannot ignore an audit letter or audit notice.

Many tax professionals and tax preparation companies offer audit protection services called "tax audit defense" to help deal with the audit process. Here, we'll explain what the most common tax audit defenses are. We will also discuss whether hiring a tax expert or seeking legal advice is worth your time and money.

What Are Tax Audit Defenses?

A tax audit defense ("tax audit representation") refers to a service tax professionals and lawyers offer taxpayers and business owners during the audit process. 

An audit defense membership or service provides taxpayers with a tax professional to represent them throughout the IRS tax audit process.

Some of the services tax audit defenses offer include:

• Communicating with the IRS on your behalf
• Gathering and preparing necessary documents and information
• Attending meetings
• Submitting documents
• Negotiating with the IRS agent handling the audit

Tax professionals who offer these services must be authorized to practice before the IRS. You don't want to rely on an ordinary accountant or other tax professional until you confirm they have this authorization.

A person qualifies to offer these services if they are a certified public accountant (CPA), licensed tax attorney, or enrolled agent.

What Are the Most Common Audit Defenses?

You're probably scared and nervous if you're facing a complicated tax situation, such as an audit. This is perfectly normal. One way to prepare for an IRS audit is to familiarize yourself with some of the most common audit defenses.

When tax filers face an audit, they often do at least one of the following:

• Present documentation for any red flags the government identifies
• Offer valid explanations for excessive tax deductions or tax credits
• Keep thorough records so you can challenge any claims made by the tax auditor
• Maintain that your tax return is complete and accurate

Of course, when you meet with your tax attorney, they'll help craft your defense. It may be impossible to avoid paying additional taxes. The good news is that, even if you incur a tax liability, your attorney may be able to negotiate a fair payment plan. If you're honest and transparent, you should make it through the audit process relatively unscathed.

This doesn't mean you'll walk away without a tax debt. The tax audit results may not be in your favor. However, as long as you present your most vigorous defense, you should achieve the best possible outcome.

How Tax Audit Defense Services Work

You have every right to handle a tax audit on your own. You may feel confident enough to challenge any claims made by the IRS. However, if you fear an audit could result in significant penalties or taxes, you should consider purchasing tax audit defense services.

Taxpayers, small business owners, and self-employed filers often purchase tax audit defense to protect their assets and respond to tax audits without incurring additional taxes or penalties. This is especially true if the audit involves multiple tax years.

It's important to keep in mind that audit defense doesn't prevent an IRS or state audit. It reduces the risk of an audit and helps the audit process go smoothly.

Types of Tax Audit Defenses

There are different types of tax audit defense. Some tax professionals offer a pre-paid service that you buy when you file your tax return. You can also purchase a tax audit defense if you've already filed your tax return and suspect an audit.

Some of the types of tax audit defenses include:

Pre-paid audit representation: When youfile your tax return, the tax professional you use may offer you a pre-paid tax return audit fee. This pre-paid method works like insurance. You pay a relatively small audit fee in exchange for full audit representation if the IRS audits you. The downside of this method is that you pay the fees without knowing if the government will ever audit you.
Independent tax audit representation:If you don't buy pre-paid audit representation, you'll have to retain professional help and pay the full price for the service. Depending on which service you get, it can be costly.

Choosing an Appropriate Tax Audit Defense

There are several types of tax audits. You don't necessarily need tax audit representation if your tax return needs nothing more than verification of information. The IRS will review your entire tax return to ensure no mistakes.

If everything checks out, the IRS will make no changes to your tax return, and you won't need to take further action. Before you purchase a tax audit defense, ensure that it makes sense to buy it.

When choosing a tax audit defense service, ask yourself the following questions:

• Is the tax professional authorized to practice before the IRS (for a federal tax audit) or the state (for a state tax audit)?
• How much experience and skills does the tax professional have?
• What does the audit defense include?
• Does the tax professional have positive reviews online?

A tax audit defense is worth purchasing only if your tax return is complex or the IRS charges you with penalties or a crime. You want to choose the proper tax audit defense to resolve your audit issues. Confirm that the tax professional has relevant experience and knowledge of tax law.

Get the Best Defense to Your Tax Audit: Hire an Attorney

Dealing with IRS audits is stressful and frightening. Obtaining tax audit representation may not be necessary for simple tax returns. However, it may be worth speaking with a tax authority if you're worried about getting audited. Not only will an experienced tax lawyer help with your audit defense, but they'll also give you peace of mind.