When dealing with an IRS audit, the important to obtaining a favorable outcome for the taxpayer could be as straightforward as understanding the policies and procedures that exist to safeguard the interests in the taxpayer. Early inside the audit procedure, the taxpayer or their certified representative should think about the policy against repetitive examination, the IRS policy on reopening examinations, and also the different statutes of limitations that apply to examination in the taxpayer's records and books.
1. The IRS Policy Regarding Repetitive Examinations
An initial consideration is whether or not 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 in the past two years, as well as the audits resulted in essentially no change. In case you are a taxpayer who has been audited when in the past two years as well as your audit resulted in tiny or no modify, then you must raise the repetitive examinations concern using the IRS instantly upon receiving an audit letter from the audit. In many instances, the audit can be resolved and closed at this extremely early stage in the event the requirements in the repetitive examinations policy are met. This can be a really useful method that may be used to simplify the audit process for the taxpayer.
2. The IRS Policy Concerning Reopening Examinations
The IRS usually doesn't reopen closed circumstances. It might happen in rare instances and under extremely limited situations. If the IRS tries to reopen a closed case, the taxpayer or his or her certified representative must make sure that the IRS is following its own procedures and regulations regarding 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 contemplate initially when getting an IRS audit notice will be the application of different statutes of limitation governing audits. Typically, the IRS can include returns filed within the last 3 years in an audit. Nevertheless, the IRS does have significant leeway to expand an audit to consist of additional tax years if the examination reveals a must look into the taxpayer's tax situation in previous years. At the same time, this right of the IRS to examine further years but be tempered by an opposing requirement that the examination from the taxpayer's tax return be reasonable. Internal Income Code section 7605(b) states that only a single inspection shall be made of a taxpayer's books of account for each and every taxable year. IRC 7605(b) also provides that no taxpayer shall be subjected to unnecessary examinations or investigations of their tax liability. Consideration of statutes of limitation, too as any reasonableness arguments that may be made on the taxpayer's behalf, are an essential component of any IRS audit strategy.
Formulating an Audit Method
If the 3 guidelines above usually do not apply for your case and an IRS audit is going to take spot, the taxpayer and his or her representative ought to right away devise a robust strategy for coping with specifics from the examination and communicating with IRS personnel. The representative must initially evaluate the taxpayer's situation and determine any prospective weaknesses or exposure points. With regard to exposure points and weaknesses, the representative must then create a strategy for handling those sensitive and vulnerable aspects from the client's tax scenario. From the taxpayer's perspective, a realistic attitude and outlook must be established, which includes the consideration of possible settlement of the audit with the IRS at some point down the road. In severe audits, the representative and taxpayer should also go over the possibility of tax litigation and prepare potential concerns with an eye toward eventual litigation in Tax Court. Frequently times the best final results can be achieved in the appellate level, but only in the event the appellate officer believes that you will go to Tax Court if necessary to accomplish the very best outcome.