Why You Should Not Represent Yourself in an IRS Audit


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Representing yourself or your company in an audit initiated by the Internal Revenue Service (“IRS”) is likely to be an exercise in futility. The IRS employs highly skilled revenue agents who will seek to take advantage of taxpayers who, understandably, are not knowledgeable on the rights and powers of the IRS.

An IRS audit begins with written notice to the taxpayer from the IRS.

The IRS does not select taxpayers for audit at random, rather the IRS utilizes computer scoring methods known as the Discriminant Function System (DIF) and the Unreported Income DIF (UIDIF) in selecting individuals and businesses for audit. The taxpayer’s DIF score rates the potential for change on the return based on past IRS experience with similar returns, while the UIDIF score indicates to the IRS how likely or unlikely it is that that the taxpayer has unreported income.

Being selected for an audit by the IRS does not mean you have done anything wrong. It does, however, put you under the microscope of the IRS and its revenue agents.

The IRS has trained its revenue agents to conduct thorough audits designed to have the audited taxpayer reveal far more than the taxpayer is legally obligated to reveal. In addition, the revenue agent will seek to discover information to expand the scope of the audit, whereas the taxpayer’s goal should be to limit the scope of the audit.

Your tax attorney must be experienced in the skill and art of limiting the amount of information that IRS revenue agents have access to. While the average taxpayer does not understand the restraints and limits on the powers of IRS revenue agents, a tax attorney will have the knowledge and experience to combat an overreach in power by IRS revenue agents. Taxpayers who go unrepresented run the risk of providing too much information, thereby expanding the scope of the audit, and risking a worse outcome for the taxpayer.

Often, in the course of an IRS audit, the IRS will ask the taxpayer to consent to an extension of an applicable statute of limitations for assessment. There are several things to take in consideration when agreeing to extend the statute of limitations. The first consideration is whether or not the extension is beneficial to the taxpayer. Believe it or not, in some cases it will be beneficial. This determination should be made, however, by experienced tax counsel. The second consideration is what the scope of the extension is, meaning what the extension actually covers. Lastly, one must consider the length of the extension. Experienced tax attorneys at can provide you with the requisite guidance needed to make these important decisions with respect to extending the statute of limitations in your audit.

If the cost of paying a tax attorney to represent you before the IRS concerns you, do not let it. Your tax attorney is an advocate for you who will fight to ensure that your money stays with you and does not go to the IRS. Many who try to save money in an audit by forgoing legal representation often end up spending much more in the long run than had they otherwise obtained legal representation.

ABOUT THE AUTHOR: Janathan L. Allen
Janathan L. Allen is founding attorney at Janathan L. Allen, APC. Ms. Allen also brings international tax, accounting and finance knowledge to Allen Barron, Inc. She has worked with a diverse group of U.S. and international businesses, advising clients in the legal, financial and tax arenas. Janathan L. Allen is active as a speaker and teacher. She has taught CPAs and attorneys through the National Business Institute and led seminars throughout California on tax-advantaged corporate structures and tax minimization. Ms. Allen received a B.S. in accounting from the University of Montana. She holds an M.B.A. in international finance from the University of San Diego, a J.D. from Southwestern University School of Law in Los Angeles and an LL.M. in taxation from the University of San Diego School of Law.

Copyright Janathan L. Allen, APC
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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