One of the quickest ways your day can be ruined is by receiving notice of audit in the mail. An examination is an unplanned event that can inject chaos into your life. After getting over the initial shock you'll have to decide whether to represent yourself or to obtain outside assistance.
Thursday, June 9, 2011
If you are being Audited
Depending on your circumstances, an audit can be confusing and lengthy. Generally, an auditor will review your income versus your deposits or request proof of expenses. Defining how the examination is going to be run and defining issues will help the audit go smoother. Hiring someone who has experience in audits will greatly increase your chances of success.
Don't speak to the Government.
It is advisable that you do not speak to anyone at the Government, mail any correspondence, complete any forms, or sign any documents no matter how simple or straightforward they may seem. Your statements or actions could have legal significance at a later time.
Who to hire.
The big question is who to hire. Many factors go into this decision but it comes down to hiring an attorney, accountant or an enrolled agent. I believe that either a CPA or an attorney will give you your best chance at success. Keep in mind that your communications with an accountant are also not subject to the same privilege as those with your attorney. That means that in some cases your accountant can be forced to testify about things you told him in private. Tax attorneys have received advanced training in interpreting the law and generally will provide the best representation when it comes to gray areas of the law.
Speak only to an attorney.
If you want to discuss the facts relating to the audit with tax specialists then it is best to first contact a tax attorney. If you follow this rule your communications with your attorney will remain privileged. You can speak to him or her freely about the facts of your case. Your communication will remain privileged even if you don't end up hiring that attorney.
If you receive an audit notice, act reasonably quickly so that you can respond by any dates provided in the notice. You can lose important rights if you don't act on time.
Control over tax returns.
The preparation of any tax returns that become due during a pending audit should be placed under the control of the attorney handling your audit. This will help your attorney close your exam and will minimize the risk that an audit or other investigation expands to the current year.