What to Do If You Fail a San Diego Tax Audit

An audit with the Internal Revenue Service (IRS) is a review of an individual’s or organization’s financial information to be sure that the amount of tax that has been reported is correct.

Since the IRS doesn’t have the resources to audit every single person and organization annually, it does choose who it audits for various reasons. The most common reasons that the IRS will conduct an audit are: 

  • You have failed to file your tax returns
  • You are connected to another individual or business that has been audited
  • You’ve claimed a high number of deductions for your tax bracket
  • Your deductions are inconsistent with your previous years’ earnings
  • There are inconsistencies between the numbers that you report and your employer’s records
  • You’re chosen at random

If you have failed a tax audit as an organization or as an individual, it’s essential to contact an experienced tax attorney quickly to help you navigate an appeal. Contact Regal Tax & Law Group, PC today to get started.

Consequences of Failing a Tax Audit

During the audit, if the IRS feels that there is nothing wrong with your federal tax return that will be the end of the investigation. However, if the IRS finds that there have been errors in your return – regardless of whether they were intentional – you may suffer a financial penalty such as a fine or interest or even a criminal penalty. The good news is that if you are found to owe money, there are various repayment plans from which you can choose. 

It’s important to remember that if the IRS is auditing you, it doesn’t mean that you are in trouble. Audits are a normal part of taxes and are simply conducted to ensure that your information is correct. What happens next is dependent upon what the IRS finds through its audit. 

  • If your tax returns are correct and you’re able to prove it, there’s nothing to worry about
  • If you don’t have the right documents to show that your return is correct, a tax attorney can help you to find the proper data to defend yourself 
  • If you have unintentionally filed the incorrect information, the IRS will simply bill you for the amount that you owe
  • If you purposefully filed a false tax return and are concerned about being convicted of tax fraud, it’s important to consult with a knowledgeable and tax attorney who has experience working on tax audit cases

Appealing an IRS Decision

If you disagree with what the IRS has concluded, you have the right to appeal its decision through the IRS’s Office of Appeals and Tax Court. The Office of Appeals, an independent division of the IRS, can overturn or modify the results of your audit.

How to Appeal

To file an appeal, you should include the following information:

  1. Your name, address, and daytime phone number;
  2. A statement of your intent to appeal;
  3. A copy of the auditor’s letter, which outlines the anticipated change(s);
  4. A breakdown of the tax periods involved along with an explanation;
  5. A description of each statement you are contesting;
  6. Evidence that supports your position on each contested statement;
  7. Your legal argument supporting your position on each contested item;
  8. A statement regarding Penalty of Perjury: “Under the penalties of perjury, I declare that the facts stated in this protest and any accompanying documents are true, correct, and complete to the best of my knowledge and belief.”; and 
  9. Your signature.

The Appeals Officers will weigh the costs of litigation (in Tax Court) against what would be considered an equitable negotiation. Their goal is to find the middle ground for everyone involved. 

Length of the Appeals Process

The appeals process can take quite some time before you hear back. The good news is that the IRS can’t collect until the end of your appeal process. If your appeal is unsuccessful you still have the opportunity to establish a repayment plan for paying back any money owed to the IRS. You do not have to pay it all back at once. 

While the appeals process can be done on your own, it’s usually in your best interest to consult with a knowledgeable and experienced tax attorney. He or she can help to make the process much simpler and faster.

Contact Our Experienced California State Tax Attorney

At Regal Tax and Law Group, PC., each client receives powerful representation and individualized attention. When you consult with us, we will take the time to help you understand all the options available to you so that you can make informed decisions about your tax matter. We’ll help you to gather the relevant evidence, fill out the correct paperwork, and negotiate on your behalf. We have a well-earned reputation as trusted California tax attorneys with the know-how to resolve the most complex tax controversies. Please contact our office today for a complimentary consultation.