Many clients come to me after their audit with a tax agency such as the IRS or California Department of Tax and Fee Administration. Unfortunately, the taxpayer often made a mistake and the audit did not turn out favorably. What can an attorney do to defend you at an audit?
1. Limit the Scope of the Audit. The initial request for a face-to-face audit often asks the taxpayer to bring in a vast amount everything related to the preparation of the return. I have even seen the government ask for copies of actual returns that the government should already have. A good tax attorney should be able to review your returns for things that look unusual or would trigger an audit. Your business may have had a down year or a very profitable one. You may have started a business without training and your bookkeeping may not conform to industry standards. An attorney will get out in front of the problem and prevent the auditor from broadening the years of the audit or the scope of the audit.
2. Protect your rights. I have seen clients sign waivers to extend the statute of limitations for the government to audit them. They were not informed that they were opening the door for a greater tax liability. Taxpayers are sometimes concerned that they will appear uncooperative with the auditor if they refuse to sign. Some auditors record the audit by audio or video. You cannot just make a blanket declaration concerning self-incrimination. An attorney will be able to object to questions that could harm you for your assessment for both civil and criminal charges. As part of he administrative process, your objections will be preserved by a knowledgeable attorney. This is invaluable should you need to appeal and eventually file a tax court petition.
3. Familiarity with the process. Government audits tend to be industry specific. Your attorney is familiar with how the government proceeds with the audit and how the auditor exams your particular business. You will go into an audit prepared for what is going to be asked and examined. The attorney will make sure that you are not vulnerable to fishing expeditions and you will be prepared to an answer questions the auditor will likely ask.