B y . Lance Wallach
IRS audits are going to increase tremendously this year. They will also increase in the future.
The IRS will specifically be targeting small business owners and high-income individuals and
professionals. If you are a small business owner and operate as a sole practitioner, or as an S
corporation, you will probably be audited. Small business owners who operate as C corporations
are less likely to be audited. Most IRS agents do not like to work hard. It is very easy to beat the
IRS at the audit game. You need to have good records and an accountant who has lots of
experience fighting audits. I suggest using a former IRS agent who was with the IRS for at least
20 years. Even though most IRS agents tend not to be hard workers, 20 years gives him enough
experience to know the ways of the IRS. A lot of my friends still work for the IRS and I always
hear good stories about audits.
Beware of someone whose fee is based on a percentage of how much you save in taxes. Or
who promises to get you a significantly higher refund than anyone else can. People like these are
likely to prepare outrageous returns that will land you deep in trouble with the IRS.
Just because the IRS says you owe money doesn’t mean that’s correct. The agency makes
mistakes - plenty of them, even computing penalties and interest.
Having a smart, well-prepared tax expert on your side can be a tremendous advantage. Not only
will they know the ins and outs of the tax code, but also they can take over the often-exhausting
job of dealing with the IRS – and help you decide how far to push the fight.
If you feel you have a bulletproof case but are getting nowhere with an auditor, stay calm – and
consider asking to speak to that person’s manager. If that doesn’t help either, consider taking
your case to an IRS appeals
office. An IRS publication says, “most differences” between
taxpayers and the IRS that reach the appeals level are settled. For details see IRS publication 556.
You may also consider taking your case to the IRS Taxpayer Advocate Service, or TAS, an
organization within the IRS created to help taxpayers resolve problems, as well as advocate for
changes within the system.
You may be eligible for help if you have tried to resolve your tax problems through normal IRS
channels and haven’t gotten anywhere, or if you believe and IRS procedure isn’t working, as it
should, such as an amended return that hasn’t been processed, as advocate spokesperson says.
If you are facing a financial crisis and have no hope of repaying everything you owe, consider
asking the IRS to settle for some lesser amount.
Specifically, IRS employees “will be permitted to consider a taxpayer’s current income and
potential for future income when negotiating an offer in compromise,” the IRS said. “Normally,
the standard practice is to judge earnings in prior years.”
Lance Wallach, National Society of Accountants Speaker of the Year and member of the AICPA
faculty of teaching professionals, is a frequent speaker on retirement plans, financial and estate
planning, and abusive tax shelters. He writes about 412(i), 419, and captive insurance plans. He
speaks at more than ten conventions annually, writes for over fifty publications, is quoted
regularly in the press and has been featured on television and radio financial talk shows
including NBC, National Pubic Radio's All Things Considered, and others. Lance has written
numerous books including Protecting Clients from Fraud, Incompetence and Scams published by
John Wiley and Sons, Bisk Education's CPA's Guide to Life Insurance and Federal Estate and
Gift Taxation, as well as AICPA best-selling books, including Avoiding Circular 230 Malpractice
Traps and Common Abusive Small Business Hot Spots. He does expert witness testimony and has
never lost a case. Contact him at 516.938.5007, firstname.lastname@example.org or visit www.taxaudit419.