How does audit protection work?

August 17, 2020 by Keith York, EA
Audit

This is quite an open-ended question, but I’ll do my best to provide examples of the specific benefits having an audit defense membership can provide for you.

First and foremost, audit defense works by protecting you from the hazards and stress of facing off against the IRS (or a state tax agency) on your own. Let’s be clear: audit defense is not audit immunity, but rather the subtle peace of mind that comes from knowing that when the going gets tough, you’ll have a team of battle-hardened tax professionals at your side.

Audit defense works by making sure auditors are held accountable for their determinations, and that if the audit results in a balance due, you owe no more than you legally owe. Our defenders protect your wallet by not only making sure any tax due is as little as possible, but that any penalties are waived where appropriate. While we cannot guarantee you will owe no taxes at the end of your audit, we strive to achieve the lowest possible amount due based on your facts and documents.

TaxAudit will be by your side, helping you explore every opportunity to get the best outcome in your audit. We’ll double-check proposed audit adjustments for factual and mathematical accuracy, as well as legal accuracy. Examiners trust documentation when it is presented in an organized and professional manner, so we will assist in getting those documents organized in such a way the auditor doesn’t have to think too hard about. Many IRS auditors will even give you credit for misclassified expenses or deductions during the audit, rather than require you file an amended return after the audit is complete to correct the reporting error. The challenge is knowing how and when to ask.

Fortunately for our members, knowing how to do things the “right way” is what we pride ourselves on every day here at TaxAudit. The many ways in which audit defense benefits you can be broken down into three key elements: planning, organizing, and delivering results.


Planning – Case Evaluation and Development of a Response Strategy

clipboardUpon assignment of your case, one of our highly qualified tax professionals will review the audit notice and go through the self-prepared tax return as it was originally filed (or as amended, if applicable). We’ll look for any potential errors or omissions and share our thoughts on what may have triggered the audit. We can usually determine where the error lies, and then discuss with you options as far as what would be the best possible strategy for defending the tax return and anything being questioned in the audit.

When you are under audit, you want as much help and guidance as you can get, especially if you have lost records or did not maintain adequate books and records. Reconstructing your records of income and expenses after the fact, whether business or personal, is a formidable task. Fortunately, the kind folks at TaxAudit thrive under the pressure of guiding our members during these difficult times. We excel at sewing together bits and pieces of accumulated information into a clear and cohesive response. We know what examiners are seeking when it comes to verifying your income, deductions, or dependents, which are common audit issues. We work with you and keep you informed every step of the way toward a successful audit outcome.

We understand verifying your expenses isn’t always easy, especially long after the fact. But you can trust in our tried-and-true approach and in the recommendations offered to help you with obtaining the necessary documents if you no longer have them. Where applicable, we can provide you with templates and worksheets, so your supporting information is presented in the highest standard possible. We’ll also provide you honest feedback on where your records are strong, and more importantly, where they are not.

This type of critical document review and feedback is extremely important, as it can take several months before you hear back from the IRS about whether your records were satisfactory. The best strategy in almost all cases is to make sure your documentation is rock solid, so put the time in now to get it right. You get one shot to make a great first impression. Submitting messy and disorganized records is a surefire recipe for a prolonged audit, or the audit being expanded to additional issues on the return or additional tax years.


Organizing – Gathering Available Information and Submitting the Official Response

clipboardFortunately, helping you put your best foot forward during the audit is what we do best here at TaxAudit. We know from first-hand experience where the bar lies when it comes to substantiating your deductions. Our tax professionals are audit documentation experts who work closely with you through every step of the journey, from the initial review of the notice and instructions on what documents to obtain, to the assembly and submission of your records, to filing a protest or rebuttal letter if there is an erroneous audit determination. Once it has been determined that a successful audit defense case can be made, you will be asked to complete a Power of Attorney designation or authorization form(s) to make the audit representation official.

The primary method of exchanging documents with us is through our secure Membership Assistance Portal, commonly referred to as “MAP,” which is a secure method of sending sensitive information. Information can also be mailed in or submitted via fax. Emails are not utilized for privacy reasons, as email is not secure, and you never want to take chances when it comes to protecting your confidential information from getting into the wrong hands. Since the tax agency normally has a deadline for submitting the documents to them, we work with you to make sure our response on your behalf is received by the auditor in a timely manner.

As your documents are submitted and reviewed, they are grouped into an overall response package using advanced PDF document assembly software. Great effort is made to ensure there is no duplication or missing records. Page separators are used as needed, and a relevant cover letter on TaxAudit company letterhead is prepared that itemizes what the response package entails. This gives your documentation a quality that will earn the respect and proper attention of the assigned tax examiner. In working with TaxAudit, you are joining forces with a company that has been representing taxpayers for over three decades, carrying with it a long-standing reputation for operating in an ethical and professional manner.

Your tax professional here at TaxAudit representing you before the IRS or state tax agency helps get your documentation to the agency in the swiftest possible manner, and in such a way as to ensure the assigned auditor has the clearest understanding of your unique situation. A well-organized, complete, and timely submitted response is the most persuasive way to get the auditor to accept your original tax return as filed. If there are problems and your records are deemed inadequate, we will let you know. We will then advise you on when and how to best address any additional requests that the auditor might make.


Delivering Results – Review or Rebut the Audit Findings to Ensure Best Possible Outcome

clipboardResults matter, and all of us at TaxAudit take pride in being good at what we do. We truly care about our members and it shows up in the quality of work we perform on our members’ behalf. We provide an exceptional service at a very low price, for a simply unbeatable value. And while we don’t have a crystal ball that can see into your audit future, we are very good at providing realistic best-and-worst case projections. Despite the unknown and uncontrollable x-factors of whether the auditor is having a bad day or not, we make every effort to see that you get the best possible result in your audit defense case.

In many cases, audit adjustments on a self-prepared tax return are inevitable due to filing and reporting errors, or inadvertent omissions. Likewise, if you are unable to document your deductions, there will be adjustments. Fortunately, there are many instances where additional taxes assessed in an audit can be overcome, such as through unlocking tax credits or deductions that become available with the change to your income and tax liability. In cases where errors can’t be overcome, your tax professional can help minimize potential noncompliance penalties by exploring whether and to what extent a case for reasonable cause abatement of those proposed penalties can be made.

With all the uncertainty over what laws are applicable and what facts are most relevant, handling an audit of an income tax return can be very complex whether you are the Tax Examiner or the Audit Representative. Examiners will and do make mistakes, although not often. Without the relevant expertise or job knowledge, such errors will go unnoticed. In this respect, audit defense is the best way to protect yourself from the potential financial consequences of an audit gone wrong – an improper audit determination.

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Glynis Miller, CPA, MST
Tax Content Developer

 

Glynis began her career with TaxAudit in February 2006 as a Seasonal Tax Return Reviewer. In December of 2008, she joined the permanent staff as an Audit Representative. Glynis has been an instructor for both continuing education tax classes and various staff training classes since 2009. Glynis holds a Bachelor of Science Degree in Accounting and a Master’s Degree in Taxation. Prior to joining TaxAudit, Glynis worked in private and public sectors of accounting. She has worked at regional accounting firms preparing tax returns, financial statements, and audit services. Her professional career has spanned over a wide variety of industries from advertising, construction, commercial real estate, farming, manufacturing and more. In 2017, Glynis joined the Learning and Development Department as a Tax Content Developer. She is providing a wealth of accounting and tax knowledge, writing skills, current job awareness, and a very cross-functional skillset to the team. 


 

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