Why Hire an Attorney for IRS Audit Representation
IRS audits come in three primary forms: correspondence, in-person, and field audits. Correspondence audits are the most common and involve the IRS requesting additional documentation or clarification via mail. In-person audits require the taxpayer to meet with an IRS agent at a local office, while field audits are the most comprehensive, with an IRS agent conducting the examination at the taxpayer’s home or business.
Common triggers for these audits include discrepancies in reported income, such as underreporting or overreporting, unusually high deductions, or suspicious activity on tax returns, like large, unexplained changes in income or deductions.
Without proper representation, taxpayers risk miscommunication, failure to provide adequate documentation, and the potential for increased tax liabilities, penalties, or legal repercussions, which could have been mitigated with professional guidance.
Why Your CPA Might Not Be Enough
While both CPAs and tax attorneys can represent taxpayers in IRS audits, their roles and expertise differ significantly. CPAs excel in financial documentation, tax preparation, and accounting, making them well-suited for straightforward audits. However, their services may fall short in complex IRS disputes where a deep understanding of tax law, negotiation, and legal strategy is crucial. With their legal training and expertise, tax attorneys are better equipped to handle intricate issues, negotiate settlements, and represent clients in tax court.
Moreover, attorney-client privilege offers a significant advantage; unlike CPAs, tax attorneys provide confidentiality protection, ensuring that any discussions and advice remain protected from disclosure during legal proceedings, which is invaluable in sensitive or contentious cases.
Why You Need An Attorney
Attorneys are uniquely qualified to handle the complexities of tax laws due to their specialized legal training and understanding of local tax laws. This expertise allows them to interpret and apply tax regulations in ways that can substantially benefit their clients during an IRS audit.
Here are some main advantages of having a tax lawyer on your side:
- Strategic Legal Guidance: Attorneys can craft sophisticated legal arguments and strategies, often beyond the scope of non-legal professionals, safeguarding that your case is presented favorably.
- Comprehensive Case Analysis: A tax lawyer can thoroughly analyze your financial situation and tax filings, identifying potential issues and opportunities to reduce liability or dismiss penalties.
Risks of Self-Representation in an IRS Audit
Handling an IRS audit alone can lead to several common pitfalls, such as misunderstanding the IRS’s requests, providing incomplete or incorrect documentation, or inadvertently making statements that could increase your tax liability.
Miscommunication with the IRS can result in escalated penalties, additional taxes, or even legal action, as the IRS may interpret errors or omissions as intentional fraud. Without professional guidance, you may miss out on opportunities to negotiate more favorable terms or fully protect your rights.
Long-Term Benefits of Hiring an Attorney
Legal representation during an IRS audit is crucial in protecting your credit score and overall financial standing. A tax attorney can proactively address potential issues that might otherwise result in tax liens or levies—both of which can severely damage your credit and hinder your ability to secure loans or credit in the future.
By negotiating with the IRS, an attorney can work to prevent or resolve these actions quickly if they arise, thereby minimizing their impact. Moreover, having an attorney manage your audit ensures that all aspects of your case are handled professionally, reducing the risk of further IRS scrutiny or additional legal complications that could arise from errors or misunderstandings during the audit process.
Reduce or Eliminate Penalties and Interest
Lawyers can reduce penalties by negotiating with the IRS using legal arguments based on reasonable cause or first-time penalty abatement, ensuring that penalties are minimized or eliminated. They also leverage their expertise to secure favorable settlements that lower overall tax liabilities.
Here’s a quick guide on the process:
- Case Evaluation: Attorneys gather all relevant financial records, assess your case, and identify grounds for penalty reduction or elimination.
- Strategic Negotiation: They craft legal arguments and submit requests for penalty abatement or settlement options, such as an offer in compromise to the IRS.
- IRS Negotiation: Attorneys negotiate directly with IRS agents to secure favorable terms, including reduced penalties, interest, or more manageable payment plans.
- Finalizing Settlement: They ensure the settlement is documented and the IRS adheres to the agreed terms, protecting your financial interests.
IRS Audits in New Jersey
IRS audits in New Jersey can be complex, involving federal and state tax regulations. Taxpayers in the state might face audits from the IRS and the New Jersey Division of Taxation, particularly if there are inconsistencies in reported income, large deductions, or other red flags. The overlapping rules of federal and state tax laws make having a well-versed tax attorney in both areas very important.
A knowledgeable New Jersey tax attorney can guide you through the audit process, confirm all documentation is in order, and negotiate with the IRS to protect your rights.
Need Professional Help?
Facing an IRS audit in New Jersey doesn’t have to be overwhelming. You can go through the process smoothly and protect your financial future with the right guidance and expertise. Don’t hesitate to reach out if you’re dealing with an audit or have any tax concerns.
Contact Todd S. Unger today to help you achieve the best possible outcome.
