CP503: IRS Second Notice of Balance Due – Meaning & Actions Needed

If you owe tax to the IRS, the CP503 is usually the third notice an individual receives. If your business entity owes taxes, the IRS will send this letter as the second notice of four. The letter lets you know the tax balance owed. Furthermore, it outlines payment options and warns of actions the IRS may take if you do not pay. Ideally, you should pay off your balance as soon as possible or make payment arrangements to stop collection activity and minimize penalties and interest on your account.

Here is an example of a CP503.

What To Do If You Can Pay

If you can afford to pay your taxes in full, send a check to the address on the CP503 notice. Make sure to include the payment stub from the letter and note your identifying details (social security number, tax year, and tax form submitted) on the check. Alternatively, you can make a payment online. Setting up an automatic withdraw or electronic check from your bank account is usually free, but there is a fee if you want to pay with a credit card.

What To Do If You Can’t Pay

If you can’t afford to pay the whole balance by the due date on the notice, contact the IRS directly or get help from a tax professional. You may be able to make monthly payments through an installment agreement, have the balance reduced with an offer in compromise, or stop collection activity by securing hardship status. Depending on your situation, you may also be able to get penalties waived. To get the best deal possible, you should work with a tax professional. They know how to negotiate with the IRS to get you the payment plan or relief option that’s best for your situation.

What If You Don’t Agree With Notice CP503

Contact the IRS at the phone number listed on the notice if you think it’s been sent in error. Usually, by the time you get this notice, you should have received numerous other warning letters from the IRS. In most cases, if there was an error with an amount due or other details, taxpayers notice that before receiving this particular notice. If the IRS notice is incorrect and you already made a payment, make sure to contact the IRS as quickly as possible. It is essential to ensure the IRS credits your payment to the right account.

What Happens If You Don’t Pay

You should never ignore a notice from the IRS. If you don’t pay the balance within ten days, the IRS will add more interest and penalties to your account. Additionally, if you ignore Notice CP503, the IRS may issue a Federal Tax Lien in your name. Essentially, a tax lien is a formal announcement to your creditors that the IRS has a right to stake a claim to your assets. Traditionally, the tax lien appears on your credit report. However, as of 2018, all three major credit bureaus have removed tax liens from consumers’ reports.

The agency may also start looking for assets to levy (take). Typically, you will receive another formal notice of intent to levy before the IRS begins to levy your asset. However, to protect your assets, you should try to make arrangements before that happens.

What Is Notice CP503H?

Similar to the traditional CP503, Notice CP503H also lets you know that you owe taxes to the IRS. But this notice is focused on your shared responsibility payment (SRP) account. The SRP is the amount you owe if you don’t have minimum health insurance coverage for yourself or your dependents. Usually, this is not the first notice you receive. The IRS tends to send CP503H after sending several other notices.

You can make a payment in full by writing a check and returning the pay stub at the bottom of the form. You can also contact the IRS to set up a payment plan. If you don’t make full payment within ten days, the IRS may add interest to your balance. Under federal law, the IRS cannot issue a lien for this part of your tax liability. The IRS also cannot levy your assets for SRP. However, the IRS may keep federal, state, or local tax refunds and apply those amounts to your SRP tax bill.

How to Get Help If You Receive Notice CP503 or CP503H

To get help if you receive Notice CP503 or CP503H, contact the number at the top of the page or use our site and reach out to a licensed tax professional who has experience resolving IRS issues. They will start with a free consultation. Then, they will advise you of the best steps to take in your situation. Additionally, they can help you set up a payment plan, review your eligibility for a settlement or make other arrangements with the IRS and state taxation authorities.

CP 88 Notice: Delinquent Return Refund Hold – Meaning & Actions Needed

As a general rule, individuals who fail to file their tax returns as required often find themselves in hot water with the IRS. Although the negative consequences of not handling your taxes properly may not be felt immediately, sooner or later, the IRS will catch up with individuals who have failed to file tax returns in the past. Whether your failure to file was intentional or you inadvertently made mistakes when filing past returns, the IRS has the right to hold future refunds until issues from the past are resolved.

How do you know if there are issues with your refund?

If you have filed your tax return and are expecting a refund, you may be surprised when you do not receive it. Some taxpayers are aware of situations that may result in the garnishment of tax refunds, such as prior tax bills that are still owed or past child support issues. If you are unaware of any such issues, you might not understand why you are not receiving your refund as anticipated.

What is a CP-88 Notice?

When the IRS holds a tax refund, they do not do so without notifying the intended recipient of their actions. If your refund is being held by the IRS as a result of past filing issues, you will receive Notice CP-88 from the IRS.

What does this letter mean?

Basically, anyone receiving a CP-88 Notice from the IRS is being notified that the IRS has processed your tax return and your refund is being held due to your failure to file the taxes for the previous tax year.

What steps need to be taken next?

Once you have received the CP-88 Notice, you will have to gather past documents that are missing and file any past due tax returns. If you have filed all past returns, you may be wondering why you have received this notice. In this situation the IRS may not have received all the documents making your previous returns unable to be processed. In any event, you will have to contact the IRS to determine what information is missing if you want to receive your refund. Understand that once your past returns are processed, any tax liabilities owed may be deducted from your return.

Is there a time frame in which to respond?

The notice you received may not provide a deadline for response. This is because there is no set time frame in which you are required to reply, however the longer it takes to resolve the issue, the longer it will take to receive your refund. In addition, any tax liabilities that may be owed will continue to accrue interest and penalties until resolved. For these reasons, it is in your best interest to respond as soon as possible to find out what you have to do to square up with the IRS.

Where do I find contact information?

All contact information regarding this notice will be printed at the top of the letter. Using the contact information provided, call the IRS as soon as possible to learn what steps must be taken to resolve this issue. If you have already addressed these issues in the past, you may have to explain this to the IRS representative who might refer you to the Office of Taxpayer Advocate for further arbitration.

You can find a list of qualified licensed tax professionals who can resolve your tax problems here or can start a new search by visiting our homepage. 

IRS Power of Attorney: Tax Form 2848 Filing Instructions & Details

If you are dealing with Federal tax matters, you may decide to represent yourself or have another person do it for you. To have another person act on your behalf, you must choose someone who is authorized to practice before the IRS. You can name an individual or individuals to work on your behalf through IRS form 2848, Power of Attorney and Declaration of Representative.

Why You Would Use an IRS Power of Attorney

For the most part, taxpayers need an IRS Power of Attorney under two circumstances:

1. If you want someone else to represent you during a meeting with the IRS and handle the tax situation on your behalf
2. If you want someone else to prepare a written response to the IRS, or fill out documents on your behalf

You do not need an IRS Power of Attorney if you have someone else filing an annual income tax return for you, but any of the more complex situations with the IRS will require it – like owing back taxes.

Who Can Represent You Legally

You can’t just appoint your mom for representing you in federal tax matters in front of the IRS (unless your mom also happens to be one of the following qualified individuals):

• CPAs
• Attorneys
• Lawyers
• Student Attorney
• Student CPA
• Enrolled agents
• Enrolled actuaries
• Enrolled retirement plan agents

How to Authorize an IRS Power of Attorney

When you decide to authorize someone else to act on your behalf before the IRS, you will need to follow proper procedures. You need to fill out IRS Form 2848 to allow another qualified individual to represent you and to receive your confidential tax information. You can fax or mail the form to the IRS, or your authorized individual can file the form electronically with the IRS for you.

Starting in July 2021, the IRS launched a Tax Pro Account on IRS.gov which allows tax professionals to initiate third-party authorization requests. If a tax professsional initiates a POA, they can use a checkbox as an electronic signature. The POA request automatically transfers to the individual taxpayer's Online Account.  Taxpayer then from the "Authorization" tab can electronically sign and approve the request. Upon approval, the authorization is automaticlaly submitted to the CAF. However, taxpayers must register for secure access or have been already registered. 

How an IRS Power of Attorney Works For You

Once a qualified individual has been authorized with the IRS to represent you, they will be in contact with the IRS on any tax-related matters you have. If the authorized individual doesn’t respond to the IRS promptly, the IRS will contact you directly for resolution. An IRS Power of Attorney can handle the following situations for you:

• Receive and respond to any confidential IRS tax information sent to you
• Represent you in legal matters with the IRS and tax situations you have
• Set up a tax settlement or payment agreement for you to pay back taxes to the IRS
• Sign personal tax return documents for you
• Receive money issued to you from the IRS for tax refunds (but cannot cash or otherwise use the money)
• Execute closing agreements

If you are having tax problems and need to authorize an IRS Power of Attorney for tax representation, reach out to a licensed tax professional with experience in resolving IRS tax problems.

Certified Public Accountant: What a CPA is & How They Help With Taxes

Each year millions of taxpayers find themselves asking whether or not they need the help of a tax professional. When the answer is yes, it becomes important to understand who is the best person to handle different types of tax issues. The answer is not the same for everyone and each individual must carefully consider their own personal tax situation as well as the type of person best trained to handle those situations. Here we look more closely at Certified Public Accountants (CPAs) and the type of tax situations best handled by this tax professional.

What is a CPA?

In the world of tax professionals, certain individuals are permitted to perform specific tasks based on their experience and training. An accountant is an individual trained in maintaining and auditing reports for a business. Accountants prepare financial reports and provide much-needed documentation regarding a business's financial background. While not all accountants can be a CPA, all CPAs are considered an accountant. In order to be titled a CPA, an individual must take and pass tests administered by the American Institute of Certified Public Accountants. Depending on the state in which a CPA wishes to conduct business, there may be additional state exams that must be passed in order to work in that state as a CPA. Accountants who have not received the additional training required to be a CPA may not be permitted to handle some of the tasks a CPA is authorized to perform. As a CPA, an individual can perform all accounting tasks in addition to the preparation and filing of tax returns for individuals, businesses, and corporations.

How can a CPA help you?

As a licensed professional, a CPA must take continuing education courses to equal 120 hours every three years to maintain their license. This ensures each licensed CPA is receiving the training and education necessary to remain abreast of changes in the industry. For this reason, a CPA is best qualified to handle tax issues for both businesses and individuals. The following are some of the tax issues for which a CPA can provide assistance.

• Provide advice in the handling of income tax and estate tax in the case of divorce or separation.
• Determine the tax consequences resulting from certain investment opportunities.
• Help individuals improve tax management and save money.
• Advice business owners of tax consequences associated with most business decisions.
• Design and manage the compensation and retirement plans of a business, with the proper attention to tax liabilities and savings.
• Represent a business or individual in relation to IRS issues.  This may involve preparing documents or presenting oral and written arguments to appeal an IRS decision.
• For most of the tax services listed here, many CPAs have experience performing

Any person or business can benefit greatly by seeking the counsel of a CPA with regard to most tax issues. As highly trained professionals, these individuals have a greater understanding of the complex tax codes which govern how much we pay in or receive back from the IRS.

What is the Difference Between CPAs and Tax Preparers?

Certified public accountants (CPAs) and tax preparers are both responsible for preparing tax returns, but there are some key differences between the two professions. CPAs are licensed by the state in which they work and are held to a high standard of ethics. They are also required to complete continuing education courses to maintain their certification. Tax preparers, on the other hand, are not necessarily licensed or certified and may not have to meet the same requirements.

Other Types of Tax Professionals

While CPAs are generally the most common type of tax professional, there are other professionals that can help with various tax problems. Below are the details on other types of tax professionals.

• Tax Attorney – A tax attorney offers other benefits that other professionals do not offer. They can help with a variety of tax problems and one thing they offer that others don't is that they have an attorney-client privilege. 
• Enrolled Agent – An enrolled is a licensed tax professional who can represent taxpayers in matters relating to the IRS tax laws. Unlike an attorney or CPA, they obtain their authority from the federal government rather than state governments. 
• Certified Tax Resolution Specialist – These are specialized licensed tax professionals that are certified by the American Society of Tax Problem Solvers. This certification can be obtained by enrolled agents, CPAs, and tax attorneys who meet educational and experience requirements after passing an exam. 

If you are looking for a CPA who can help with IRS taxes, you can visit this link here and then filter further by tax type, tax problem, and more. Otherwise, if you do not have an IRS problem, start your search below with the specific tax agency you have a problem with and filter later by selecting CPA only using the filters. Our network is made up of top tax professionals from around the country and our algorithm ranks them based upon their top skills that you can filter by, which ensures you can find the best professional for your unique situation.

Tax Relief Attorney: When to Use IRS Tax Attorneys for Tax Relief

Tax laws are complex and for that reason, there are many types of tax professions that have spawned off of the endlessly evolving tax code. Choosing the right type of tax professional for your particular tax situation is an important decision because it can help ensure you the best outcome and can save you money.

A tax relief attorney provides certain benefits that other tax professionals may not. Below are some benefits of using a tax relief attorney, typical situations they can be utilized for, and tax solutions they can help with.

Why Do You Need a Tax Attorney?

A tax attorney can help you deal with the IRS and various state tax agencies. They understand the resolution options for a wide range of tax issues, and they work hard to ensure you get the best arrangement for your situation.

The IRS can be very intimidating, and the tax rules are extremely complex for individuals to understand. Whether you have unfiled returns, owe back taxes, are dealing with garnishments or liens, or have other IRS problems, a tax attorney can help you find a solution.

You can start your search here of top-rated local tax attorneys that help with tax problems. We have created a system to show taxpayers the best attorneys to help with their unique tax problems. You can easily filter by your particular problem or desired solution and for the specific tax agencies involved. 

What Do Tax Attorneys Do?

A tax lawyer helps you resolve tax problems with the IRS and various state tax agencies. They use their knowledge of the tax and legal code to ensure that you get the best results possible and that you do not face an unfairly high tax liability. They can also represent you in court.

What Are the Qualifications of a Tax Attorney?

Tax Attorneys earn a bachelor's degree plus a Juris Doctor (J.D.) degree. Many also continue their education with a Master of Law in Taxation (LLM) to gain specialized knowledge about tax laws. Additionally, tax attorneys must pass the bar exam in their state.

Do Tax Attorneys Specialize?

Tax attorneys have an in-depth understanding of the federal tax code as well as extensive knowledge of the tax laws in one or more states. Most attorneys who specialize in tax law deal with the following:

• Audit representation
• Delinquent tax returns
• Unfiled tax returns
• Installment agreements
• Offers in compromise
• Penalty relief
• Tax levy release
• Tax lien release
• Wage garnishment removal

When choosing a tax attorney, look for someone who has experience with your particular tax concern as well as with the resolution method you want. If you have both state and federal tax issues, make sure the tax attorney is experienced with the tax agencies in your state.

How Can a Tax Attorney Help You?

An IRS tax lawyer can help you with the following:

• Researching your case
• Communicating with the IRS
• Negotiating tax settlements
• Representing you in court
• Saving you money

Most tax lawyers start with a free consultation where you can assess if they are a good match for your needs. You will tell them about your tax problems, and they will outline how their services can help you.

Benefits of a Tax Relief Attorney

The main benefit of working with any tax pro is that they help you negotiate with the IRS. When you choose a tax attorney, in particular, you also reap the following benefits:

1. Tax Attorney-Client Privilege: The attorney-client privilege is a legal concept that is used between attorneys and their clients. This concept makes all communication kept strictly confidential. This concept is used because it encourages clients to disclose all relevant information to their attorney. If a client discloses all information to the attorney, the attorney can provide better advice and will likely be able to represent the client in a more effective manner. This is a privilege that is not offered between accountants and their clients. Many times, individuals that use tax strategies that may be pushing the tax law boundaries may choose to work with a tax attorney instead of another type of tax professional since the tax attorney would never be able to testify against them.
2. Well-Rounded Advice: A tax relief attorney will typically have the background and knowledge to offer a wider variety of solutions to a particular tax problem than other types of tax professionals. For example, a CPA or other type of tax professional cannot offer advice for filing for bankruptcy. A tax attorney will likely have a bigger arsenal of solutions than other types of tax professionals, which is a good thing when dealing with complex or technical tax problems.
3. Representation: A tax attorney is one of the types of tax professionals that can act on your behalf and represent you before the IRS through power of attorney representation. With power of attorney representation, your tax relief attorney can represent you at meetings with the IRS, respond to IRS letters, and handle all other forms of IRS correspondence on your behalf. A tax attorney can also represent you before in tax court for tax issues. Being able to represent you in court is one benefit that other types of tax professionals do not offer.
4. Tax Negotiation: Tax laws are complex. There is no standard formula to figure out what will be owed, which tax relief mechanism a taxpayer will qualify for or which penalties the IRS will make the taxpayer liable for. Many factors of the tax code can be negotiated. Tax attorneys generally have superior negotiation skills from their background and training than other types of tax professionals. They can also negotiate on your behalf in tax court, which other tax professions cannot do.

Situations and Problems a Tax Relief Attorney Can Help With

If you are facing legal tax issues, tax crimes, IRS collection actions, or several other concerns, a tax relief attorney can help you. You may want to reach out to a tax attorney If you are dealing with any of the following tax situations or problems.

Tax attorneys can help with many other issues. Don't see your tax concern on this list? Then, contact a tax attorney directly to talk about your situation. TaxCure offers a curated list of tax attorneys so you can find someone experienced with your tax issue.

• Tax Court: If you are heading to tax court it is always smart to have an attorney on your side. A tax attorney will be able to represent you in court and will likely know the best approach for handling your situation.
• Tax Evasion: Serious tax offenses, such as tax evasion, can have some very serious consequences. Having a tax attorney on your side when dealing with IRS can greatly reduce your chances of some of the serious penalties that can be associated with tax evasion cases. There are varying levels of tax evasion penalties that can range from prison to small IRS penalties. At times, a tax relief attorney can even remove penalties that have been charged to the taxpayer if they can prove that there was a legitimate reason for not staying in compliance with tax regulations.
• Tax Fraud: If you have committed tax fraud (claimed false deductions, took fake tax credits, significantly understated income intentionally, or anything else that was done with the intent to commit fraud) and need the protection of the tax attorney-client privilege, then it is a good idea to have a tax attorney on your side.
• Willful failure to file taxes: Title 26 USC Section 7203 of the Internal Revenue Code explains that taxpayers can face up to a year in prison, fines, penalties, and restitution for not filing returns, providing information, or paying tax. If you have been charged with willful failure to file taxes, you need a tax attorney.
• Obstruction of Internal Revenue Law Administration: Under Section 7212 of title 26 USC, taxpayers who make threats or impede the administration of internal revenue laws can face up to three years in prison and monetary penalties. Don't face these types of charges without contacting a tax lawyer for help.
• Under criminal investigation by the IRS: Being investigated by the criminal investigation division of the IRS should never be taken lightly. If you are under investigation, you should hire the highest level of tax professional that you can, which is a tax relief attorney. Individuals that are hired by the IRS to investigate individuals are highly trained by the IRS, FBI, and even carry guns. It is rare that individuals get investigated, but when they do it is likely for a serious matter. One thing to know about criminal investigations is that you may not know you are being investigated until you have already been charged with a tax crime. If you know you have done something with your taxes in the past that was not right and you fear you may be investigated, it is a good idea to talk with a tax attorney before any actions are taken.
• Worried about IRS criminal investigation: Often, you may not even know that you are being investigated until you are charged with a tax crime. If you know you have done something with your taxes in the past that was not right and you fear you may be investigated, it is a good idea to talk with a tax attorney before any actions are taken
• Criminal tax defense: Tax fraud allegations and criminal tax charges can have extremely serious consequences. If you have been accused of a tax crime, you should not deal with the situation on your own. A tax attorney can help to defend you or your business.
• Failure to disclose offshore accounts: If you don't report and pay taxes on your foreign assets, you can face criminal persecution and civil penalties. The Offshore Voluntary Disclosure Program (OVCP) allows you to come forward without facing penalties, but you cannot use this program if you're under investigation by the IRS. As over 100 nations have agreed to share financial and tax information with the United States, noncompliant taxpayers are becoming more likely to be identified and persecuted.

Other Problems and Issues a Tax Attorney Can Help With

• FBAR and FATCA Offshore Disclosure Compliance Issues: If you have not filed a Report of Foreign Bank And Financial Accounts (FBAR), you may not be in compliance with the Foreign Account Tax Compliance Act (FATCA). Lack of compliance with FBAR and FATCA requirements can lead to severe penalties. Unfortunately, this happens often, especially when offshore facilitators fail to inform taxpayers of their disclosure duties. A tax attorney can help you deal with offshore account disclosure issues.
• Unfiled Tax Returns: Unfiled tax returns can be a serious issue, especially if there is a large sum of unpaid taxes that go along with them. If the filing of your tax returns does not have legal or complex issues, it may be a better option to use a CPA or an enrolled agent to help (for the purpose of saving money).
• Tax Penalties: Tax penalties can be a significant portion of the total tax amount owed to the IRS. Many times these penalties can be significantly reduced by a qualified tax professional if they can show the IRS that there was a legitimate reason for not staying in compliance with IRS tax laws. Also, if all of these penalties cannot be paid it is likely that a tax attorney can find the next best solution for you in order to get back into compliance with the IRS.
• Tax Liens: A tax lien is the government’s claim on your property. A tax lien will give the IRS rights to everything you own over any other debtor, which means it will significantly impact your ability to borrow money from anyone else. If a tax lien is not resolved it can likely lead to a tax levy, which will allow the IRS to legally seize your assets. A tax attorney can be a good choice to find the best option to get your tax lien resolved before it leads to further IRS actions.
• Tax Levy: The IRS can legally seize wages, bank accounts, real estate, cars, boats, 401K’s, and more. When being faced with a levy, it is important to act quickly to limit the financial impact. A tax attorney can likely stop the levy and prevent significant financial damage.
• Unpaid Taxes: There are countless solutions to resolving unpaid taxes. Of these solutions, some are supported by the IRS and others the IRS would never recommend. Having a tax attorney assess your situation from every angle possible can ensure you will get the best financial outcome, whether it is IRS recommended or not.
• Tax Audits: Audits are stressful. You have to give the IRS access to your records, but you need to ensure that your rights aren't being violated. A tax attorney can represent you through the audit process. Whether you're dealing with an individual or business tax audit, they can protect your rights and ensure that you don't face an unfair tax liability.
• Business Tax Controversary: Businesses have complex tax compliance requirements on the federal, state, and local levels. A single tax controversy can threaten your business and potentially close your doors. A tax attorney can help you figure out the best resolution method.
• Individual Tax Controversy: A tax attorney can help with audits, unfiled returns, undisclosed foreign assets, back taxes, or countless other individual tax controversies.
• Accountant Liability: Sometimes, CPAs or accountants need legal help. A tax attorney can represent accountants for liability cases or with other legal issues.
• Probate and Trust Tax Issues: Setting up and administering a trust or dealing with probate issues requires knowledge of tax laws. A tax lawyer can help with fiduciary duties, liability concerns, beneficiary disputes, creditors' claims, and other issues related to taxes, trusts, and probate.
• Estate and Trust Tax Planning: Constantly changing tax laws mean that you need an expert to help with estate and trust planning. A tax attorney or an estate attorney with tax knowledge is generally the best option in this situation.
• Federal employees and contractor tax issues: If you're a federal employee or a federal contractor who is facing termination due to unpaid taxes, you may need to contact a tax attorney. They can help you negotiate an arrangement for your unpaid taxes, and they can ensure your rights are protected.

Tax Solutions a Tax Attorney Can Help With

The right resolution option depends on your tax issue and your personal situation. A tax attorney can help find the right solution for your needs. Here are some of the resolution methods they use:

These are just some of the resolution options offered by tax attorneys. When you work with a tax attorney, they find the best resolution for your unique situation.

• Offer in Compromise Tax Settlements: An offer in compromise is a complex tax relief settlement that allows you to settle your taxes for less than the total amount owed. The most common situation in which the IRS will accept this sort of filing is if it can be proved that if the IRS were to forcefully collect taxes from the individual that owed taxes, they would collect an amount equal to or greater than the amount being offered in the offer in compromise filing. Proving this sort of thing is a complex task that should be handled by an experienced tax professional.
• IRS Payment Plans: The IRS offers various forms of payment plans. A tax attorney can help analyze your financial situation and determine the best type of payment plan to use, determine the monthly amount to be paid, and handle all related filings to get it properly set up.
• Penalty Abatement: Tax penalties can be partly or fully removed through penalty abatement. The IRS uses tax penalties as a way to frighten taxpayers into staying in compliance with tax regulations. The IRS does not want to punish those taxpayers that do try to stay in full compliance but have a legitimate excuse for not filing, not paying, or not filing accurately. The only way the IRS will remove these penalties is if proof is shown that there was reasonable cause for not staying in compliance with IRS tax regulations.
• Innocent Spouse Relief: An uncommon type of tax relief that many tax attorneys are aware of is called innocent spouse relief. When individuals are married and file a joint tax return, each spouse is then jointly and equally liable for the tax liability that is created. The IRS made innocent spouse relief because it realizes that at times it is unfair to hold both spouses liable for the tax liability that was created.
• IRS Bankruptcy: At times, but not often, bankruptcy can be an option to resolve IRS taxes owed. This is one option that CPAs, enrolled agents, and the taxpayer advocate will not consider, but a tax attorney or bankruptcy attorney will. There are many complexities to dealing with bankruptcy and taxes since it is likely they will not be discharged. If your financial situation and tax situation meet a certain set of requirements, taxes may be discharged.
• IRS Wage Garnishment and Levy Release: If the IRS has garnished your wages or seized the funds in your bank account, you may not have enough money left to survive. A tax attorney may be able to get the garnishment or levy released. If they prove to the IRS that the garnishment or levy is causing financial hardship, they can then negotiate a better option for your situation.
• Release of Federal Tax Lien: A tax lien is the IRS's legal claim to your property, and it can prevent you from selling assets such as homes, property, vehicles, boats, or other personal property. A tax lawyer may be able to remove liens from your assets.
• Currently Not Collectible/Hardship Status: If you do not have the money or assets to pay your tax bill, a tax attorney can help you establish currently not collectible (CNC) status with the IRS. When you qualify for CNC or hardship status, the IRS stops collection actions on your account. In a lot of cases, by the time you have enough money to pay, the statute of limitations may have expired, meaning that you no longer owe anything.

Signs You Need to Hire a Tax Attorney

You should strongly consider hiring a tax attorney or other tax resolution professional if any of the following apply to you or your business.

• You owe the IRS $10,000 or more.
• You have two or more years of unfiled tax returns.
• You owe penalties to the IRS.
• The IRS has placed a federal tax lien on your assets.
• The IRS has levied your bank account.
• The IRS is garnishing your wages.
• You want help dealing with the IRS.

The IRS has the legal right to use a broad range of collection tactics, and the agency has a lot of power. To protect yourself and your assets, you may want to work with a tax professional.

Should I Hire a Tax Attorney from My Local Area?

A lot of people struggling with tax issues wonder if working with a tax attorney near them is the right solution. There are pros and cons to choosing a local tax attorney, and you should weigh your options carefully when deciding.

Going with a local tax attorney gives you the following benefits:

• In-person meetings with your tax attorney.
• Easy to drop off documents or IRS notices.

However, restricting your options to tax attorneys near you comes with the following downsides:

• A limited pool of attorneys.
• Risk of not finding someone who specializes in your tax issue.
• Potential of wasting time driving to their office for in-person meetings or to drop off documents.
• Local tax attorneys may not have established relationships with the IRS.

When you work with a tax attorney who is not in your local area, you can easily submit paperwork over email or through the mail. And you can use virtual meetings or phone calls to take care of your tax issues from the comfort of your home.

Rather than insisting on hiring an IRS tax attorney near you, you should focus on quality. When you widen your search for a tax attorney, you can focus on experience rather than proximity. By using a site like TaxCure to search for a tax attorney, you can find the best fit whether they are down the street or hundreds of miles away.

Who Are the Best Tax Attorneys?

The best tax attorney depends on your situation. You need a tax attorney who has experience with your particular tax issue and who can negotiate with the IRS on your behalf.

At TaxCure, we have a curated list of tax attorneys and other tax professionals from around the country. You can search for tax attorneys based on their experience with different tax issues and tax resolution methods. Then, you can consult with a variety of attorneys until you find the right fit. Just click a "Find a Tax Pro" button at the very top of our site and then filter by tax attorneys.

TaxCure can help you to find the best possible tax attorney for your unique situation.

Other Types of Tax Professionals

While Tax Attorneys are excellent professionals to help with tax problems, there are other professionals that can help with various tax problems. Below are the details on other types of tax professionals.

• Certified Public Accountant (CPA) – CPAs are certified tax professionals that can help with a variety of tax issues, tax planning, tax filing, and more.
• Enrolled Agent – An enrolled is a licensed tax professional who can represent taxpayers in matters relating to the IRS tax laws. Unlike an attorney or CPA, they obtain their authority from the federal government rather than state governments.
• Certified Tax Resolution Specialist – These are specialized licensed tax professionals that are certified by the American Society of Tax Problem Solvers. This certification can be obtained by enrolled agents, CPAs, and tax attorneys who meet educational and experience requirements after passing an exam.

Tax relief attorneys are highly trained tax professionals that can help resolve many tax problems by using a variety of tax solutions. Tax attorneys offer many benefits that other tax professionals do not and also are able to provide a wider variety of solutions than most other tax professionals. If you are being faced with a complex tax issue it is a good idea to consult with a tax attorney to see what types of solutions they would recommend for you.

Tax Attorney Vs. CPA: Differences Between Tax Pros

When a lot of people start searching for help with back taxes, they wonder if they should hire a CPA or a tax lawyer. Ultimately, both of these professionals can handle complex tax issues, but in the rare situation that a case goes to court, only a tax attorney or US Tax Court Practitioner (USTCP) can represent you in front of the IRS. A USTCP is an enrolled agent who has passed a special test.

So, what's the difference between a CPA and a tax attorney? As explained above, these tax professionals can provide very similar services, and their main difference is their training.

CPA Qualifications

Most CPAs have a bachelor's degree in accounting, but many of them also obtain a master's in accounting or a Master's of Business Administration (MBA). Then, they complete one or two years of supervised accounting work experience and take the CPA exam.

Administered by the American Institute of Certified Public Accountants (AICPA), the CPA exam consists of four tests that cover several topics, and between 60 and 80% of the text focuses on federal taxation. CPAs also have to complete continuing education requirements to keep their licenses active.

What Do CPAs Do?

Unlike tax lawyers, CPAs are not authorized to practice law, but they can handle a wide range of tax issues including the following:

• Tax return preparation and filing: A CPA can be an invaluable resource for people and businesses with complex tax situations or taxpayers with high net worth.
• Minimizing tax liabilities: CPAs use their in-depth knowledge of the tax code to ensure their clients pay as little tax as legally possible.
• Tax planning: CPAs also work with their clients to create tax plans that help them meet their short and long-term personal or business goals.
• Back tax resolution: CPAs can help their clients with unfiled returns, back taxes, penalty abatement, and other state and local tax issues.

Whether you decide on a CPA or a tax attorney, you should look for someone experienced with your tax issue and desired resolution method.

Pros and Cons of Hiring a CPA

CPAs offer a lot of benefits to their clients. In particular, you can experience the following benefits when you hire a CPA:

• Help with tax prep: CPAs can prepare and amend tax returns for businesses and individuals.
• Reduced tax liabilities: CPAs can help reduce tax liabilities on your current tax return, and they can help you identify strategies to reduce your tax bill in the future.
• Assistance with back taxes: CPAs can help you explore many resolution options for your back taxes, and like a tax attorney, they can negotiate with the IRS on your behalf.

The only potential drawback of working with a CPA vs a tax attorney is that they cannot represent you in court. If you anticipate going to court, you need a tax attorney.

Pros and Cons of Hiring Tax Attorneys

While deciding between a tax attorney vs a CPA, you should also look at the pros and cons of tax attorneys. The main advantages of working with a tax attorney include the following:

• Experienced in resolving complex tax issues.
• Can save you money on back taxes.
• Ability to help you through an audit.
• Can represent you in front of the IRS.
• Can defend you in court.

However, hiring a tax attorney also comes with a few downsides. Here are the disadvantages of working with a tax attorney:

• No tax prep assistance — Tax attorneys typically don't prepare tax returns, but their law firms often employ IRS Enrolled Agents or CPAs who can help with tax prep if needed.
• Higher fees — Because they tend to deal with complex issues, tax attorneys often charge higher fees than CPAs and enrolled agents. However, this may not always be the case and it could be worth it to get quotes from other types of professionals as well depending upon your situation.
• Hourly costs — Hourly fees can get expensive, but to help you control costs, some tax resolution law firms charge a set price based on what you need.

How Much Do Tax Lawyers Charge?

The cost of hiring an IRS tax attorney can vary significantly. Depending on your situation, fees can range from $500 to $10,000 or more. Below are some of the factors that affect the cost of a tax attorney, you can also read our complete guide on the costs of hiring a tax attorney:

• Case type: The type of tax case and the amount of investigation affect the cost. Relatively straightforward delinquent filing cases, for example, typically cost less than hiring a tax attorney to help with complicated issues such as tax evasion or audit defense.
• Type of tax resolution: Tax resolution options require different amounts of paperwork and expertise. For example, setting up an installment agreement tends to be easier than applying for an offer in compromise.
• Length of your case: The longer your case takes to resolve, the more you should expect to pay. Of course, this doesn't apply in situations where your tax lawyer agrees to accept a set price based on your tax resolution method.
• Fee structure: The tax attorney's fee structure also affects your final cost. Make sure you understand how your attorney is going to charge you. Some charge a flat fee per case. Others charge hourly. Still, others charge separate fees for investigation and resolution.
• Support staff: If you have multiple lawyers working on your case, you may face a higher bill. However, you may be able to keep costs lower if you have a tax attorney supported by Enrolled Agents, CPAs, or paralegals.

Do Tax Lawyers Offer Free Consultations?

Most tax attorneys start with a free consultation. During the no-cost consultation, you talk about your situation, and the tax attorney gives you an overview of your options and an estimate of how long the process should take.

Free consultations with tax attorneys can take place in person or over the phone. To make the most of this time, you should have details about your tax situation or your latest notice from the IRS. 

Are Tax Attorneys Affordable?

Hiring a tax attorney can be an investment, but it depends on your situation. To decide if a tax attorney is worth the cost, you may want to compare the amount you can save in back taxes to the attorney's fees. 

Beyond that, you should also consider the intangible value offered by the tax attorney. They can save you time and reduce your stress. Dealing with back taxes, appealing audits, applying for settlements, or seeking tax amnesty on your own can be confusing and time-consuming. Tax attorneys save you time and provide you with peace of mind. They also help you avoid costly, time-consuming mistakes. 

Tax Lawyers at the IRS

When you're dealing with tax issues, it's helpful to know who is on the other side. The IRS hires Tax Law Specialists to deal with a variety of tax matters. To qualify for these jobs, applicants must have extensive knowledge of the tax code and pension laws. They also have to know about different businesses and industries. 

To become an entry-level Tax Law Specialist, applicants must have a four-year degree and legal or tax accounting experience. This experience allows them to enter as grade 5 Tax Law Specialists, and because the IRS uses a GS-5/7/9/11 career ladder, they may eventually be able to advance to grade 11. Tax attorneys who have a JD or LLM may be able to enter the IRS at a higher grade than five. 

If you're dealing with Tax Law Specialists from the IRS, you need a tax professional who is just as knowledgeable and experienced. 

Find a Tax Attorney Today

At TaxCure we have made it easy for taxpayers to find top-rated tax resolution attorneys throughout the country. Our network contains many tax professionals, including tax attorneys that can help with resolving various tax problems. You can start your search below by selecting the agency/agencies you are having issues with and then you can select problems or solutions you are seeking, as well as filtering by only professionals that have a law license. Start your search today to find the best professional to help with your unique situation.

IRS Audit Letter: Understanding Your Tax Audit Notification

The standard way for the IRS to communicate to taxpayers about audits is through various IRS audit letters. When it comes to audits there are a few different types of notifications the IRS will send depending upon how the IRS is planning on auditing you or has audited you. Below are the common IRS audit letters and notifications you may receive from an IRS audit.

• Notice of Audit and Examination Scheduled – This is the standard notice that will be received as the notification to the taxpayer that they will be audited and the IRS wants to meet with them to discuss their tax return.
   
• IRS Letter 525: General 30 Day Letter – This letter is to inform you that the IRS has a proposed adjustment to your tax return. This can be from a math error or something else that the IRS is fairly confident you have made a mistake on. If you agree with the proposed change made by the IRS then you can sign and return the agreement form. If you don’t agree with the adjustment made by the IRS then you can request an appeal/protest with the IRS office that sent you the letter.
   
• IRS Letter 531: Notice of Deficiency – This letter is to notify you that you owe additional tax for the tax year/years identified in the letter. This letter will explain how to dispute the adjustments if you do not agree. You can either agree and pay or file a petition with the tax court within ninety days from the date you received the notice.|
   
• IRS Letter 692: Request for Considering of Additional Findings – This letter is sent along with a report that will give you detailed adjustments made to your tax return. If all looks good and you agree to the adjustments made then you can sign the agreement and return it to the IRS. If you do not agree, you can submit a request to appeal/protest with the office that sent you the letter. You will have to act quickly on this letter if you do not agree because you only have 15 days from the date you received it to request an appeal.
   
• IRS CP 2000 Notice: Automatic Adjustment Notice – This is one of the most common automated adjustment notices. This notice will show proposed changes to your tax return. The information the IRS uses when sending these out is when it compares income, payments, credits, and other deductions reported on your tax return with the information provided by third parties. Be careful with this notice because many times they are wrong. If you agree, you can agree and pay the amount owed. If you don’t agree you can call the IRS or contest it in writing. If you don’t contest within 60 days then the IRS will make the adjustment final within 60 days.
   
• IRS CP75 Notice: Exam Initial Contact Notice – This notice states that the IRS is auditing your tax return. You will need to provide additional documentation to support credits that were claimed on your return. Generally, this notice is questioning the Earned Income Credit. They will be holding the Earned Income Credit, additional Child Tax Credit, and Recovery Rebate Credit parts of your tax refund until they receive the results of the audit/documentation from you.
   
• IRS Form 4564 (IDR): Information Document Request – An information document request (IDR) is the primary tool for the IRS to obtain information from the taxpayer under audit. This is a guide on how an IDR request works, how to respond to the IDR, what happens if you don't respond to the request, and who can help you with this type of audit.
   
• IRS Letter 915: Letter to Transmit Examination Report – This letter is to notify you of adjustments in your tax amount. If you agree with the adjustment the IRS has made then you can sign and return the agreement form. If you don’t agree, you will need to file an appeal/protest within 30 days of the letter being received.
   
• IRS Letter 950: 30 Day Letter Straight Deficiency or Over Assessment – This letter is sent after IRS field audits. It is used for un-agreed, straight deficiency, straight over-assessment. This letter will state the findings and if you agree with them then you can sign and return the agreement form to the IRS. If you don’t agree with the findings then you will have 30 days to file an appeal/protest.
   
• IRS Letter 3391: 30 Day Nonfiler Letter – The IRS will send this letter if it believes you have a tax liability due from returns that you have not filed. The letter includes a proposed adjustment to your tax liability. If you agree with the adjustment proposed by the IRS then you can sign and return the agreement to the IRS. If you don’t agree with the adjustment then you will have 30 days to file for an appeal/protest with the IRS.

It is important to not overlook IRS audit letters because an action is typically required on your part. Just remember that if you don’t agree with the IRS findings you will always have a chance to dispute them with the IRS, but action must be taken soon or it will make it much more difficult. If you are unsure of the appropriate actions to take it is a good idea to consider hiring a tax professional to help you with the audit.

If you are looking for help with a tax audit, review this list of tax professionals who have experience resolving IRS audits or start a search below and click "audit or examination" using the filters on the search page under "problem experience."

IRS Audit Tips: Advice on How to Beat & Survive a Tax Audit

If you are selected for an audit you have no choice but to follow through with it. Two things you should strive for in the audit are to minimize the financial impact and to prevent the IRS from investigating beyond the initial items selected for audit. There are times when you may get a refund or owe nothing more after the audit, but chances are you will owe money. It is important to know how to go into an audit understanding how to prevent the IRS from looking at additional information and how to keep the financial impact of the audit to a minimum. Below are some IRS audit tips to make it through the audit and come out with the best outcome possible.

What to Know About Tax Auditors

Before going into your audit you need to keep a few things in mind about the auditor/auditors you will encounter. Auditors have a very tough/stressful job because many people are angry and resent the fact that they are being audited and will take it out on them. Try to keep your cool around the auditor and realize that the auditor is just doing their job and they want the audit to flow smoothly and calmly just like you. Another important thing to keep in mind is that auditors are trained to keep their eye out for things that just don’t seem right, which means anything you say or show them in addition to what was asked for, can be used against you. Being polite and friendly can go a long way, but just be aware that the auditor is examining you and your return.

Advice to Follow During a Tax Audit

• Be as brief as you can: Audits are stressful and when people are nervous, they tend to talk too much. Auditors are trained to listen to everything you say. Saying too much can lead to the auditor looking at other tax years that weren’t covered with the initial audit. When possible, keep your answers to the following: Yes, No, I don’t know, I will have to research that, what exact documents do you need? What is the reason for that? Talking too much is a very common mistake that costs people big money during audits.
• Do not lie or make misleading statements: The IRS may ask questions they already know the answers to in order to see how much they can trust you. It is best to be completely honest, but do not ramble and say anything more than is required.
• Don’t offer other years' tax information: If you show the auditor tax returns from other years and they see something that they don’t agree with, they have the right to make adjustments on that tax year even though it wasn’t covered with the initial audit notice. It is important to only bring in the documents that are stated in the IRS notice in order to limit the scope of the tax audit.
• Have all required support: Going into the audit with all the required documents and having it organized can impress the auditor and make them realize that you are willing to cooperate and make things flow smoothly. If you are missing documents, you are allowed to reconstruct them. The auditor is required to consider the newly created documents if they seem reasonable. Courts have recognized that taxpayers can’t be expected to keep perfect records and sometimes they are willing to accept verbal explanations, but the better your records the smoother your audit will flow.
• Be yourself during an audit: It isn’t only just your tax return under review, you are being reviewed as well by the auditor. The auditor will observe your actions and if something doesn’t seem right it may cause more problems for you. Auditors try to get a sense if you are hiding something, or if your mannerisms are odd when certain items are discussed. Be aware, especially early on in the audit process that the auditor is looking for these types of things, so try to avoid coming off as if you having something to hide.
• Don’t give original documents to an auditor: The IRS is known for losing documents. If the auditor wants a copy of one of your original documents, be sure to make a copy and keep the original yourself. Because the IRS lost one of your documents isn’t an excuse for not having proper support.
• Understand how the IRS feels about substantial compliance: There may be times where you will not be able to come up with all of the required documentation to back up some of your deductions. If you can show the IRS that you have enough proof that you did follow IRS tax laws, but your documentation is lacking, they may allow the deduction to be taken. Files do get lost, few people have perfect records and the IRS does understand this.
• Appeal the audit if you don’t agree: It is your right to appeal an audit examination report. The best way to start is by calling the auditor that you don’t agree with and make your argument. If you are having trouble making your point then you can choose to meet with their manager, appeal with the IRS, or go to tax court.
• Consider hiring a tax professional: A tax professional can represent you before the IRS. A qualified tax professional is well versed in audits and is well aware of IRS tactics. Chances are, a tax professional can help ensure a better outcome of the audit.

Tips for Dealing with a Tough Auditor

Sometimes auditors are tough and they think they can walk all over you. Here are some tips on how to deal with an auditor that is not acting appropriately.

• Delay the audit: Auditors do not like delays because many times their performance is based on cases that they close. If they know you are going to delay them they can possibly lighten up a bit to allow the audit to move forward on a better tone. To delay, you can ask for a recess and pick it back up at a later time. If they won’t allow a recess you can then say you want to talk with a tax professional before going any further with the audit. If you talk about wanting a professional, the auditor must legally grant your request (You don’t actually need to get one, but the request will end the audit for the current session).
• Request a New Auditor: If you feel like you are being treated unfairly or the auditor is not being respectful to you, request a new one. In order to request a new auditor, you will need to speak with their manager. When speaking with the manager you should tell them that you feel you are not being treated with respect and you would like to work with someone else. Most likely, your request will not be granted, but the fact that you told the manager how you were being treated and that manager likely talked to your auditor, you may see the tone of the audit change.
• Stand up to the auditor: If you are sensing that your auditor thinks that you will just accept whatever they find then it is a good idea to start questioning them. If they start getting the feeling that you will question everything they do and they will need to provide an explanation, they may begin to think twice about certain things. It is fine to ask questions during an audit, just try to do it in a polite manner. Be sure to let them know that it isn’t going to be easy for them to get their way on everything.
• Consider recording the audit: You are allowed to record your audit with the IRS as long as you let them know in writing ten days before. When the auditor knows all proceedings are being recorded, this can limit abuse and can create a more professional environment.

Audits can almost be seen as a game. There are clear strategies to being successful in audits but there are no clear-cut formulas to getting through them. If you had two identical tax returns with the same backup information, you can have two significantly different outcomes of the audit depending upon how it is played. Keeping in mind these tips can help ensure a better outcome.

If you are looking for a licensed tax professional to help with a tax audit, review this list of tax professionals who have experience resolving IRS audits. Alternatively,  start your own search below and click "audit or examination" under the filter on the search page called "IRS Problem Experience."

Tax Audit Help: IRS Audit Defense, Assistance & Representation

Tax audits can be stressful and complicated. You can find tax professionals on our site that have helped thousands of taxpayers work their way through IRS and State tax audits. We can help connect you with a tax professional that can either provide you with audit assistance or audit representation.

How Audit Assistance Works

• Have a tax professional review your notice and explain what everything means
• Help you find or come up with any documents you may need
• Research all of the issues that are mentioned in the notice
• Get a detailed description of what to expect during the audit
• Review the audit findings and get a detailed description of next steps
• Understand your options if are audited and owe more money and cannot pay
• Get an understanding if your case is qualified for an appeal

If you want your professional to do all handling for you, that can be done as well. You can have your tax professional handle all communication and represent you before the IRS or State taxing authority.

How Audit Representation Works

• All audit communication goes to your tax professional and they respond back on your behalf
• Research any issues that are likely to come up during the audit
• Respond to the taxing authorities arguments by coming up with answers on your behalf
• Meet with the IRS or taxing authority in person if required on your behalf
• Negotiate and settle taxes owed if you end up owing more money during the audit and cannot pay
• Handle any unforeseen issues that may arise during the audit

How Using a Professional is Beneficial During an Audit

Using a tax professional to help with an audit can significantly increase your chances of getting a better outcome. Many times individuals don’t realize that audits can go both ways, you may actually end up being owed money after an audit. A tax professional can analyze your situation and find the best approach to take in order to get the best outcome. The IRS actually prefers working with tax professionals because it makes their job easier and helps the process move along more efficiently, which can actually result in a more favorable decision.

How it Works

• View our network's top-rated audit professionals on the right column of this page. Also, use the search feature on our site to get more granular with your tax issue to find the best professional that meets your unique needs. 
• Get a quick understand of how the professional can help you in your particular situation and what the likely outcome will be
• You can choose to have the tax firm/tax professional file for power of attorney and represent you before the IRS or State taxation authority
• Get your audit underway without the stress of handling it on your own

Do you need help defending against an IRS audit? Understand how we can help connect you with a tax professional to either give you audit assistance or audit representation. Using a tax professional can significantly increase your chances of getting a better outcome. Audits are stressful and time-consuming. 

To find a list of tax professionals that help with a tax audit, these tax professionals have experience resolving IRS audits. You can also begin a search below and click "audit or examination" using the search filter called "IRS problem experience."

Tax Audit Guides & Information on Income Tax Audits

Everyone has heard the statistics about tax audits and how it is very unlikely to receive one in a given tax year, but over your lifetime it is more likely than not that you will get audited. Whether you are currently being audited, you want to prevent an audit, need help with an audit, or just want general information on an audit, you will find everything you need below.

Avoid Tax Audit: Tips on How to Avoid IRS Audits

Everyone has heard the horror stories about tax audits. These are some tips to keep in mind when you are filing your taxes or doing financial planning, in order to limit your chances of getting audited. A basic understanding of how the IRS audit process works and what they look for can significantly reduce your chances of getting audited by avoiding the common mistakes most people make and end up getting audited.

IRS Audit Tips: Advice on Beating & Surviving a Tax Audit

Two goals you should have when going through an audit are to minimize the financial impact of the audit and to prevent the IRS from investigating beyond the original items selected for audit. There are no clear-cut formulas to an audit, an audit is more like a game filled with many different strategies. These tips can help ensure the financial impact of an IRS audit is minimal.

IRS Audit Procedure: Guidelines for IRS Audits

Understand how the audit process works. Know how and why tax returns are selected for an IRS audit. Once a tax return is filed it will go through a series of computer programs to check for the likelihood of errors. Depending upon what kind of errors the IRS believes you have made it will send a letter and say what kind of audit they are planning on doing. Understand basically how an audit works and what to expect after the audit has been completed.

IRS Audit Red Flags: Understand Who & When the IRS Audits

Audit flags are another name for factors that increase the score your tax return gets when it is processed by the IRS computers or is reviewed manually by an IRS employee. Many of these red flags can be avoided, while some cannot. Being aware of common red flags while completing your tax return can significantly reduce your chances of an audit. If some of these red flags cannot be avoided for you remember to keep as much support for those items as you can to make your life easier if you do get audited.

IRS Audit Reconsideration Request Guide

IRS audit reconsideration is a process where a taxpayer can have the IRS review an audit that has already been completed. The irs audit reconsideration request must be made in writing and should include new information or documentation that was not available at the time of the original audit. The IRS will then take a look at the case and determine if the original audit conclusions were correct. If the IRS decides that the original audit was incorrect, they will make the necessary adjustments. The IRS audit reconsideration process can be very beneficial for taxpayers who believe that they have been unfairly audited. However, it is important to note that the irs does not guarantee that they will reconsider your case or that they will change their original decision. Learn more about the audit reconsideration procedure, when, how, and where to submit an IRS audit reconsideration, as well as the paperwork that must be sent.

Guide to IRS Form 4549 – Income Tax Examination Changes

If the IRS reviews your return and decides to make a change. the IRS will send you IRS form 4549. This form will go over the IRS's proposed changes to your tax return as well as the change to the amount you owe (or possible refund). This form will also give you the ability to request an audit reconsideration. This guide will go over what to expect when you receive this form and how to respond

IRS Audit Statute of Limitations: Years Back IRS Audits Tax Returns

The IRS has strict rules on when it can audit a tax return. Know when you can stop worrying about a tax return that you filed in the past. There are actually 3 different statutes that apply to tax returns being audited and they are based upon the severity of the “mistakes” that were made. Most of the time the IRS will only have 3 years to audit a return, but if you don’t hear from the IRS within 18 months, it is very unlikely that your return will be selected for an audit.

IRS Audit Statistics: Rates and Chances of Receiving a Tax Audit

Statistically, the average person only has a 1% chance of getting audited. This 1% is only the average of all different income levels. Individuals that report higher income are more than twice as likely to get audited as people with lower income. Here are some statistics on IRS audits based upon income class and filing type.

IRS Audit Letter: Understanding Your Tax Audit Notification

The standard way for the IRS to communicate before and after a tax audit is through various IRS audit letters. Understand the various letters that the IRS will send to you, what they mean, and what actions must be taken on your part after receiving one of them. It is important these notices don’t go overlooked because most of them will require you to take action.

Information Document Request (IDR) and Form 4564

An IDR is a primary tool for the IRS to obtain information for a taxpayer under audit. The IRS will issue such information requests on form 4564. Understand how IDR requests work, how to respond, what happens if you don't respond and why you should consider hiring a tax professional to help with these types of requests.

IRS Summons: Why the IRS Sends and What to Do If You Receive One

The IRS issues Summonless to people who are being investigated or might have important information related to an investigation of another entity. This guide covers the various types of summons, what to do if you receive a summons, what happens if you ignore and guide to responding to one.

IRS Audit Penalties – Possible Penalties From An Adverse Tax Audit

If the IRS audits your tax return and finds some inaccuracies, you most likely will owe taxes, along with additional penalties and interest. Find out some common IRS penalties and potential criminal charges you would be facing.

Tax Audit Help: IRS Audit Defense, Assistance & Representation

Do you need help defending against an IRS audit? Understand how we can help connect you with a tax professional to either give you audit assistance or audit representation. Using a tax professional can significantly increase your chances of getting a better outcome. Audits are stressful and time-consuming. 

Tax Audit Attorney

Find out when you should hire a tax audit attorney for help with an IRS or state tax audit. Get tips on selecting an audit attorney. Find out how to find the best audit representation near you.

If you are looking for a licensed tax professional to help with a tax audit, review this list of tax professionals who have experience resolving IRS audits or start a search below and click "audit or examination" using the filter on the search page called "IRS Problem Experience."

The Tax Audit Process: Procedure, Rules & Guidelines for IRS to Audit

Tax audits can be conducted by the IRS and by State departments of taxation. The following information is based upon IRS tax audits, just keep in mind that most state audit processes and procedures are fairly similar to the IRS. The purpose of a tax audit is to verify that the tax reported is correct. Most of the time when the IRS selects your return for an audit it is because statistically there is a problem based upon the numbers you provided. Being selected doesn’t always mean there is a problem, sometimes you may actually be due a refund after the audit or the IRS accepts your tax return as is.

How Tax Returns Are Selected for an Audit

The IRS uses many different factors when selecting which returns it is going to audit (Triggering audit flags). The majority of tax audits are determined by computers. The IRS has several different computer systems that do various types of analysis on returns that do statistical analysis to score tax returns based on their likelihood of being correct. The IRS also chooses audits based on other non-computer-related analyses as well, all methods are described below.

1. The Discriminant Function System (DIF): The IRS has a computer program that is called the Discriminant Function System that gives each tax return a score. This score is called the DIF score. The score is a number that statistically determines the likelihood of the tax return being accurate. The higher the number that is assigned to the tax return, the higher the likelihood of that tax return being audited. The IRS does not share the details of how exactly their system works, but it is believed that there are several hundred variables that are weighed out and it is believed that deductions and exemptions carry the biggest weights.
2. The Unreported Income Discriminant Function (UIDIF): This is a second computer program that is used by the IRS that looks at different factors than the DIF system. The purpose of this program is to rate the return on its potential to have unreported income. This system scores people based upon expense and income ratio. Mainly what this is trying to determine is if an individual is spending more money than they make and therefore likely has other income that they are not reporting to the IRS. It does happen sometimes that individuals do have low-income years and this triggers an audit for them, but most of the time this can be explained easily to an auditor.
3. The Information Returns Processing System (IRP): This is a third computer system used by the IRS that stores massive amounts of data received from third parties that are required to report taxpayer income, such as employers, banks, brokerage firms, social security administration, and other institutions that are required to report information to the IRS on taxpayers. For example, your employer is required to report to the IRS how much they paid their employees throughout the year. The IRS will then run their matching system to make sure the individual taxpayer reported everything that was already provided to the IRS. Using this system the IRS can find individuals that have likely underreported their income and they will follow up with an audit.
4. Incriminating Documents Turned Over to IRS: In rare cases tax returns will be selected to be audited based upon information that was obtained by the IRS in the effort to identify participants in tax avoidance transactions. Sometimes the IRS will get the courts to order information from the promoter to be handed over to the IRS. This information can point out individuals that were involved with the promoters' tax avoidance schemes.
5. Audits of Related Entities: If the IRS audited another tax return and that return involved transactions with other taxpayers such as investors or business partners and that return had a problem and it is likely that other individuals that are related to that entity/individual then it is a possibility that the IRS will then select those related tax returns to audit.

Types of Audits Once Selected

Once the IRS determines that it would like to follow through and get more information about your tax return, they will send a letter stating that your return has been selected for an audit. Below are the 3 different examination methods used by the IRS.

1. Correspondence Audit: This is the most common type of audit and is done by mail. The IRS will normally request specific documentation to support particular items on the tax return.
2. Field Audit: This is when the IRS wants to come to your home, place of business, or your tax professional's office to perform the audit. This is the least common form of audit and is only used if the individual or business being audited earned well over $100K.
3. Office Audit: This is when you are required to go to an IRS office to meet with an IRS auditor. The IRS will determine the time and the particular documents that it would like you to bring for support.

What Happens After an Audit

After the audit, you will either be handed or mailed IRS Form 4549, which is the IRS examination report, and will show the proposed changes to tax liability. This form will provide a clear explanation of any adjustments made. The report will either state that you have had no changes or you are due a refund (no action required on your part, you won!) or it will state the changes that have been made and you owe more taxes plus interest and penalties. You have two options once you receive this, you can approve their findings or you can choose to disagree with their findings, each described in more detail below.

• Approve of Audit Findings: If you agree with the proposed changes then you should sign and return a copy of the report with IRS Form 870. IRS Form 870 is the Consent to Proposed Tax Adjustment. Once you sign the form you are agreeing that you have a tax deficiency and the additional tax penalties and interest that are listed on your examination report as well. If you owe more taxes than you can afford to pay in full then you can request to pay through a payment plan. The payment plan you use will be determined by how much money you owe and how much you can afford to pay monthly.
• Disapprove of Audit Findings: If you don’t approve of the findings in the examination report then you will have 30 days to do any of the following:
  • Mail-in additional documents you would like them to consider,
  • Request a discussion on the findings with the examiner (you can do this and submit additional information to be considered).
  • Discuss your case with the group manager or senior manager
  • Request an appeal: If you do not agree with the proposed changes and you were not able to clear up the disagreement with the examiner then an appeal could be a good possibility.

You will have 30 days to consider the proposed adjustments after receiving the examination report. If you do not respond within 30 days then the IRS will send a notice that your case is considered not agreed and if you will have only 30 more days to file for an appeal or the IRS findings will become final. 

To find tax professionals that can help with a tax audit, review this list of licensed tax professionals who have experience resolving IRS audits or start a search below and click "audit or examination" using the filter on the search page called "IRS Problem Experience."