While confronting an IRS audit, the crucial to obtaining a favorable outcome for the taxpayer can be as straightforward as understanding the policies and procedures that exist to safeguard the interests in the taxpayer. Early inside the audit process, the taxpayer or his or her certified representative should think about the policy against repetitive examination, the IRS policy on reopening examinations, and the numerous statutes of limitations that apply to examination in the taxpayer's records and books.
1. The IRS Policy Concerning Repetitive Examinations
An initial consideration is regardless of whether or not the taxpayer's audit violates the IRS's policy against repetitive examinations. The policy against repetitive examinations applies when the taxpayer has been audited previously two years, as well as the audits resulted in essentially no change. If you're a taxpayer who has been audited once in the past two years as well as your audit resulted in small or no modify, then you should raise the repetitive examinations problem using the IRS instantly upon receiving an audit letter in the IRS. In many instances, the audit can be resolved and closed at this extremely early stage in the event the needs in the repetitive examinations policy are met. This is a very useful strategy that can be employed to simplify the audit method for the taxpayer.
2. The IRS Policy Regarding Reopening Examinations
The IRS usually does not reopen closed circumstances. It may occur in rare cases and below very restricted circumstances. If the IRS tries to reopen a closed case, the taxpayer or his or her qualified representative should ensure that the IRS is following its own procedures and regulations concerning to reopening closed IRS examinations.
3. Statutes of Limitation Applying to IRS Audits
Another factor that the taxpayer or his or her representative need to consider initially when getting an IRS audit notice may be the application of various statutes of limitation governing audits. Typically, the IRS audit
can contain returns filed within the final three years in an audit. However, the IRS does have significant leeway to expand an audit to consist of extra tax years in the event the examination reveals a need to appear in to the taxpayer's tax circumstance in previous years. At the same time, this correct in the IRS to examine further years but be tempered by an opposing requirement that the examination in the taxpayer's tax return be reasonable. Internal Revenue Code section 7605(b) states that only 1 inspection shall be created of a taxpayer's books of account for each taxable year. IRC 7605(b) also gives that no taxpayer shall be subjected to unnecessary examinations or investigations of his or her tax liability. Consideration of statutes of limitation, too as any reasonableness arguments that will be produced around the taxpayer's behalf, are an important component of any IRS audit technique.
Formulating an Audit Strategy
If the three guidelines above do not apply to your case and an IRS audit is going to take location, the taxpayer and their representative ought to instantly devise a robust strategy for dealing with specifics in the examination and communicating with IRS personnel. The representative ought to initially evaluate the taxpayer's scenario and recognize any possible weaknesses or exposure points. With regard to exposure points and weaknesses, the representative ought to then create a method for handling those sensitive and vulnerable elements of the client's tax situation. In the taxpayer's perspective, a realistic attitude and outlook has to be established, such as the consideration of possible settlement from the audit with the IRS at some point down the road. In significant audits, the representative and taxpayer should also talk about the possibility of tax litigation and prepare possible concerns with an eye toward eventual litigation in Tax Court. Usually times the very best results could be accomplished at the appellate level, but only when the appellate officer believes that you simply will go to Tax Court if essential to achieve the very best result.