Services: Audits and Audit Reconsideration

The IRS can select a tax return for audit for any number of reasons. A certain item on a tax return may draw the scrutiny of the IRS or a tax return may merely be selected for audit at random. Regardless of the reason for the audit, the audit process is one fraught with danger for the unrepresented taxpayer. An audit is a lengthy and in-depth examination of a taxpayer’s tax return. Additional information and detailed explanations are generally required, and additional years may be examined.

The IRS generally has three years after a tax return is filed to audit that return and to assess additional tax. However, if there is a substantial omission of gross income on the tax return (25% or more), the IRS has six years after the tax return is filed to audit that tax return and to assess additional tax. Finally, the IRS can assess tax at any time if no tax return is filed, or if there is fraud or an attempt to evade the tax on the return that was filed.

Case Study: In this case study, the taxpayer had a farm in a neighboring state that was mainly used for recreational purposes. However, on his tax return, the taxpayer listed the farm as income property which generated significant losses. Further, the taxpayer also claimed business expenses on his tax return that he did not actually incur. The tax return was selected for audit by the IRS. The taxpayer was initially represented in the audit by the CPA who prepared the tax return. The taxpayer then retained Patrick T. Sheehan & Associates who immediately realized that the problem was much larger than the taxpayer realized. In a typical audit situation, any changes made by the IRS typically results in the assessment of additional tax, penalties and interest. However, if the taxpayer claims expenses to which he is not entitled or underreports income, not only is the taxpayer exposed to additional tax liabilities, but he is also exposed to the fraud penalty and/or criminal prosecution. Because the taxpayer and his representative had met with the IRS prior to retaining Patrick T. Sheehan & Associates, much damaging information had already been provided to the IRS.

At the conclusion of the audit the IRS may propose additional tax, penalties and interest. However, the taxpayer may still have an opportunity to contest the audit deficiency at IRS Appeals or in the United States Tax Court. The IRS may also issue a Notice of Deficiency.

Case Study: In this case study, the taxpayer went to an accountant who promised huge refunds on everyone’s tax returns. Our taxpayer then received substantial refunds for several years. Our taxpayer then recommended the accountant to his friends and family and was paid a finder’s fee. The IRS later contacted the taxpayer and notified him that the tax returns contained significant errors and included a business that did not exist. The taxpayer did not understand the complexity of the tax return and did not closely review it before signing it. However, the taxpayer did enjoy the large refunds. The taxpayer’s accountant intentionally inflated expenses on the tax return and made up a business that did not exist. Beware of tax return preparers that promise a refund on every return. If your tax return has been selected for audit, please immediately contact Patrick T. Sheehan & Associates to assist you.

If the taxpayer did not attend the audit or was poorly represented, Patrick T. Sheehan & Associates, will contact the IRS and attempt to establish a basis for an audit reconsideration. The IRS has the ability to grant an audit reconsideration.

If granted an audit reconsideration, the taxpayer will be given the opportunity to present the necessary documentation to substantiate the items contained on his or her tax return. If successful, the IRS will abate all or part of the prior audit deficiency, including penalties and interest.

Case Study: In this case study, our taxpayer’s returns for 1999, 2000, and 2001 were audited many years ago and additional significant tax liability was assessed. Worse yet, many of the taxpayer’s records were not available during the audit and the taxpayer was unrepresented by an attorney. Our taxpayer subsequently retained Patrick T. Sheehan & Associates who demanded that the IRS reopen the audit. The new information that was presented to the IRS resulted in the abatement of nearly all of the previous tax that was assessed against the taxpayer including penalties and interest. Not only was the previous liability abated, the taxpayer received a substantial refund of the money the IRS had seized from him over the years.

Patrick T. Sheehan & Associates, Attorneys at Law, P.C. has successfully represented many taxpayers in audits and has been able to obtain audit reconsiderations in many cases since its inception in 1991. If you have been notified that you will be audited or have been audited, please call us. Patrick T. Sheehan & Associates can help. Call us before the IRS calls you!®

We can help. Call us before the IRS calls you! ®