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San Jose tax attorney for IRS auditsIf you are the subject of an Internal Revenue Service (IRS) audit, you likely have many questions about what the auditing process will entail. The IRS may have chosen you for an audit after comparing your tax return against “norms” for comparable returns, or you may have been selected because your tax returns involved transactions with other taxpayers who have been selected for an audit. The IRS manages audits through the mail and/or in-person interviews. As part of the auditing process, the IRS will request access to certain documents and financial information that supports the income and deductions claimed on your tax return.

Common Records Requested by the IRS

The documents and records that the IRS will want to examine during an audit can vary depending on your specific circumstances and the basis for the audit. Commonly, the IRS will request copies of:

  • Receipts: You may be asked to send the IRS receipts proving purchases you have made or money you have received for a product or service.
  • Canceled checks 
  • Bills: The IRS may request bills showing the person or entity receiving payment, the type of service received, and the dates on which you paid them.
  • Loan agreements: You may need to send copies of loan applications or agreements as well as information about how you used money that was loaned to you.
  • Travel logs and tickets: The IRS may want to examine travel plans and dates, mileage information, tickets, and expenses.
  • Theft or loss documents: If you experienced a theft or loss, the IRS will want to see insurance reports describing the loss, police reports, adjustor appraisals, and other relevant information.
  • Medical records
  • Legal documents: The IRS will likely want copies of documents related to property acquisition, tax preparation, divorce settlements, custody agreements, and any civil and criminal cases you have been involved in.

Your Rights During an IRS Audit

It is critical for anyone going through a tax audit to remember that they have certain rights as a taxpayer. In addition to professional and respectful treatment from IRS employees, you also have a right to confidentiality, the right to know why the IRS is auditing you, the right to know how the IRS will use any information gathered, and the right to know what the consequences will be if you do not provide the requested information. Most importantly, you have the right to be represented by a qualified tax lawyer. If you disagree with the IRS’s findings, you have the right to challenge or appeal the IRS auditor’s decision or file a petition with the U.S. Tax Court.

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: San Jose foreign income tax compliance lawyerIn July 2019, the Internal Revenue Service Large Business and International Division announced that six new campaigns are being launched to help noncompliant taxpayers avoid criminal prosecution and/or civil penalties. These campaigns are part of an effort to allow taxpayers who are currently behind on their tax obligations to become compliant with the law. Two such campaigns address obligations related to foreign financial assets and expatriates. If you have unresolved tax issues related to foreign assets or are living outside the United States, these campaigns may be of special interest to you.

The Purpose of the Offshore Voluntary Disclosure Program

U.S. citizens or residents who make money outside the United States are still required to report this income to the Internal Revenue Service. Those who fail to report foreign assets and pay the associated taxes may be subject to civil penalties and even criminal prosecution. In 2009, the IRS created the Offshore Voluntary Disclosure Program (OVDP) as an avenue for taxpayers to avoid criminal liability and resolve outstanding tax debt related to foreign assets. This program ended in 2018. Because many former OVDP participants are still noncompliant with U.S. tax laws, the IRS has launched a number of new campaigns to address compliance issues.   

Post OVDP Relief and Expatriation

The IRS has recently announced a new campaign addressing individuals who had previously participated in the OVDP but have failed to remain compliant with foreign asset reporting. The Post OVDP Compliance campaign will identify problems that represent a risk of noncompliance. The IRS says it plans to address tax noncompliance through examinations (audits) and “soft letters,” which warn taxpayers that they may need to take steps to meet their reporting requirements.

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Posted on in Tax Audits

: San Jose tax audit appeal attorney

If you have gone through an IRS audit and received a letter advising you of its findings, chances are the agency has made determinations about which you are not happy. In some cases, the IRS may determine that you owe back taxes, plus interest and penalties. While some taxpayers may agree with the IRS’s findings and pay the assessed amount, you may believe that the findings are incorrect. In these cases, you should be sure to understand your options for asking the IRS to either reconsider or adjust the determinations.

Appealing the IRS’s Decision

Although audits are best handled by working with the IRS during the audit process, it is also possible to appeal the findings of an audit. However, it is important to keep a very good record of the audit process. This is because during an appeal, the record of the audit will be given more weight than any new information that you may wish to introduce. The auditor’s findings are part of the record, so you should make sure to have all of the supporting documentation to show why you disagree with the decision. 

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San Jose, CA IRS audit attorneyIf you have been informed that your tax returns will be examined, or audited, you may not know what to expect from the process. Often, taxpayers are upset about having to devote more time to their tax returns, and they may be worried about a larger tax liability or concerned that they will face penalties from the IRS.

All of these thoughts are well-founded. Hiring an attorney to look out for your best interests during the course of an examination is allowed under IRS rules and may help you keep your tax liability as low as possible.

How Is One Chosen for an Examination?

According to the IRS, there are two ways your tax return may be selected for an audit. The first way is by computer programs that find incorrect amounts on your returns when compared to documents like W-2s or 1099s. 

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Posted on in Tax Audits

eggshell audits, San Jose civil tax audit lawyer, tax fraud, tax audit, tax liabilitiesA tax audit can be a frightening situation. The United States tax code is complex, and many taxpayers are unfamiliar with its intricacies and the potential consequences that they may face if they have committed a violation. In some cases, taxpayers may face what is known as an “eggshell audit,” which is a civil audit that may potentially result in criminal charges. While this is an informal term, it refers to the care that must be taken in these situations as taxpayers seek to minimize their tax liabilities and civil penalties while avoiding criminal prosecution.

Potential Consequences of an Eggshell Audit

Eggshell audits occur because a taxpayer filed a fraudulent tax return. The taxpayer may have underreported the income he or she earned or claimed improper deductions or credits. The end result is that the taxpayer paid less taxes than he or she would have owed if he or she had filed an accurate tax return. Moreover, a return is considered fraudulent if a taxpayer deliberately intended to evade paying the full amount of his or her taxes or if he or she willfully submitted false statements or documents.

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