Should I hire a tax attorney if I am facing an IRS audit? Is hiring an attorney expensive?

At first glance the IRS audit notice may seem intimidating, especially if you did nothing wrong. Believe it or not, one group of people that the IRS audits annually are chosen at random, not because they actually made any mistakes on their taxes. As with any government agency, there are times when an attorney is necessary, but also many times when you can handle the problems yourself with a little patience and good records.

The first step in the audit process is a mail notice inquiring about certain things on your taxes. The IRS might inquire about your charitable giving, a certain tax form from an employer or your home office deduction. The letter will detail steps that you need to take in your response and a deadline for sending your response back. In general, the IRS will request documentation to prove accuracy.

At this point, you can solve the audit on your own. Make photocopies of all of the relevant records. For instance, if the IRS is questioning your tithing amount to your church, make a photocopy of the annual total tithe paperwork that your church sent you.

If they are inquiring about something such as your home office, take pictures of the office emphasizing that it is exclusively used for work. Gather up all the pictures and documents and send the documents back in with a letter explaining the significance of each. Most audits will end at that if you had all of your documentation.

If you discover that you made a mistake or you are missing records, don’t panic. Pay the requested amount for the mistake. The longer you wait to pay, the more interest is tacked onto the amount owed. If you are missing records, send a letter back to the IRS specifying that you are obtaining the records from the necessary sources and will send the records to the IRS as soon as possible. Then, either call or send a letter to whomever you need to verify your records. Once again, as soon as the amount is paid or the records arrive and are sent, you are done and the audit is over.

If you receive a second notice from the IRS that either ignores or challenges your first notice, it is time to start considering hiring a professional. If your taxes were done by an accountant or used a purchased tax program, contact that company, as most will provide you with an accountant to verify your tax accuracy.

At this point, an accountant is your best option, since the IRS is simply inquiring about accuracy and not charging you with a crime. Once the accountant verifies your records, they will contact your local IRS office and handle the matter. If the accountant does find a mistake, pay the IRS, and be done. If the amount is too expensive for you to pay, but you were clearly at fault, contact the IRS to set up a payment plan.

The only time that it is truly necessary to hire an attorney in the event of an audit is when the IRS is charging you with a crime. The two most common crimes that the IRS charges people with are tax evasion and tax fraud.

If you were being audited about large mistakes on your taxes, the IRS may charge you with tax fraud. If they are charging you, the notice you receive will say so. If you have not been filing your taxes, or have been hiding funds, the IRS would charge you with tax evasion, in which case an attorney must be hired.

Overall, audits can be handled without the help of an attorney, but once your freedom is involved (i.e., charged with a tax crime), you need to call an attorney. An attorney will frame the case in your favor and pressure the IRS to settle without you serving any time in prison, and that is worth any attorney’s fees.

Case Studies: Dealing With an IRS Audit

Case Study 1: Resolving an Audit Through Self-Representation

John received an IRS audit notice inquiring about certain items on his tax return. He carefully gathered and submitted all the relevant documentation, including copies of records and explanatory letters.

John was able to resolve the audit successfully on his own by providing accurate and sufficient evidence. This highlights the importance of maintaining good records and responding promptly to the IRS inquiries.

Case Study 2: Seeking Professional Assistance for Audit Verification

Samantha, after receiving a second notice from the IRS challenging her initial response, decided to hire an accountant to verify her tax accuracy. The accountant reviewed her records and communicated with the IRS on Samantha’s behalf.

Upon discovering a mistake, Samantha promptly paid the IRS the requested amount. The involvement of the accountant helped resolve the audit efficiently, ensuring compliance and accuracy in her tax matters.

Case Study 3: Necessity of Hiring an Attorney for Criminal Charges

Sarah faced an audit that resulted in the IRS charging her with tax fraud. Recognizing the gravity of the situation, Sarah engaged a tax attorney. The attorney skillfully defended her case, negotiated with the IRS, and worked towards a settlement that avoided any criminal charges. This case highlights the importance of seeking legal representation when facing criminal accusations related to tax matters.