What is Audit Defense?

If your tax return has been picked for an audit, you have the option of hiring representation to advocate on your behalf before the Internal Revenue Service. Audit defense, also referred to as tax examination representation, is a service in which licensed tax professionals support a taxpayer through the examination process. The types of representatives who are allowed to represent taxpayers before the IRS include attorneys, CPAs, and Enrolled Agents. Boxelder Consulting & Tax Relief only employs licensed individuals who also have the experience to handle audit defense cases.

You have the right to represent yourself during an audit; however, due to the complexities and grueling nature of the examination process, we recommend you don’t do it alone. Boxelder Consulting’s team of licensed professionals has a successful track record developing and implementing audit strategies for both individual taxpayers and small businesses across the country.

As your audit defense team, we will assist you in preparing all documents, manage important deadlines, maintain necessary correspondence with the examiner, and fiercely negotiate in your best interests during formal meetings with the taxing authorities.

Survival Tips for a Business Audit

The Internal Revenue Service accepts most tax returns as they are filed, but selects a small percentage for examination – commonly known as an audit. An examination evaluates whether information on the return is being reported correctly and according to the tax laws, and verifies that the amount of tax reported is accurate. The IRS keeps this selection process a closely guarded secret, but what we do know is that self-employed individuals, persons making more than $100k per year in income, late-filers and non-filers are most frequently selected.

Don’t panic if your business has received a Notice of Audit and Examination from the IRS – all anxieties set aside, there are certain steps you can take to prepare and successfully position yourself for a positive outcome.

Limit the Scope

On the exam letter you received from the IRS, there’s going to be a year in the top right hand corner – this year acts as the formal window of time for which you are being audited. Typically, the examiner likes to go a year in advance and a year in arrears to expand the scope. For instance, if your business is being examined for the 2016 fiscal tax year, the examiner may ask for your 2015 and 2017 tax documents to broaden the scope of the exam. Of course, this also broadens the scope of your potential liability. It’s important for you to know that you have the right to decline the examiner’s request and limit the scope of your audit to the year stated on the exam letter.

Know Your Numbers

Having an organized and systematic process in place for your business bookkeeping is worth its weight in gold during an audit. The likelihood of a successful examination increases exponentially if you know your numbers and are able to provide proof of your monthly and annual business expenses. Sometimes, a simple profit and loss statement is all the proof you need to help the examiner understand how your business works. If your business doesn’t have a preexisting bookkeeping structure in place, you may want to think about incorporating a tool like Quickbooks to help streamline your company’s financials.

Be Responsive and Communicate

Turning a blind eye to problems only makes matters worse, especially when you’re dealing with the IRS. Punctuality goes a long way in this industry, so it’s best to be responsive and communicate with the examiner assigned to your case. Since it’s the IRS’s timeline running the show, this simple survival tip is the most important of all. Simply put, do not miss deadlines that are set by the examiner. If you do, the examiner can prepare and submit proposed balances based on the income information he or she does have – typically gleaned from bank records gathered via an IRS Summons sent to your bank by the examiner.

Not only can this lead to a difficult banking relationship and some embarrassment, it may also result in rather large balances proposed by your examiner. In a worst case scenario, we have seen examiners substitute the amount of income with the gross revenue or total deposits from your bank statement. Needless to say, without expenses, this result would be devastating. If this has occurred to you already, there is an avenue to protest this assessment either via IRS Collections Appeals or US Tax Court. Call us right away to speak with a licensed professional for details as timing is critical in these situations.