No one ever wants to be audited. Unfortunately, even if you do everything by the book, it is still possible to get an audit letter from the Internal Revenue Service (IRS) or the Minnesota Department of Revenue (MDR). If you get such a letter, you should never ignore it or hope that it will go away. Instead, you should contact an IRS audit attorney as soon as possible.
When facing an audit that could result in significant federal or state tax liability, it is important to get a tax professional involved as soon as possible. Auditors use methods designed to get the information needed to apply technical rules and to make technical determinations that are frequently not apparent or known to taxpayers. A tax professional can furnish your information to the auditor and explain the rationale behind your reported income, deductions, and credits in a manner designed to avoid unintended consequences from the audit process.
Few taxpayers have the experience to safely deal directly with an experienced auditor who is skilled at reaching conclusions that generate additional tax liabilities owed by the taxpayer.
If you are a Minnesota resident or business owner and have received an audit notice or inquiry from the IRS or Minnesota Department of Revenue (MDR), talk to tax attorneys at Pridgeon & Zoss, PLLC well in advance of your audit date.
Why Am I Being Audited?
An audit is a review of an entity or individual’s financial information to ensure that they are reporting this data accurately and in compliance with federal and/or state tax laws. Being audited does not necessarily mean that there is a problem with your taxes. It is possible that your tax returns were randomly selected for an audit, or that your returns were selected based on a statistical model.
There are a number of things that may trigger an audit, such as reporting large losses on a Schedule C, deducting a large number of business expenses, or claiming large charitable donations. Whatever the underlying reason for the audit may be, it is vital that you reach out to a tax audit attorney as soon as you receive notice that you are being audited by the MDR or the IRS. This is particularly true when you are aware of potential issues with your tax return or when there is a substantial amount of money at stake.
At Pridgeon & Zoss, our legal team has more than 35 years of experience representing taxpayers in both federal and state audits. Our attorneys will advise you about the audit process, tax law, and the options that will be available to you if the audit result is not satisfactory, such as administrative appeals, and possible court proceedings.
Why Do I Need an IRS Audit Attorney?
Accountants are excellent at “running the numbers,” but that doesn’t mean that they are experienced in negotiating with IRS or MDR auditors. A taxpayer’s accountant should be the taxpayer’s first line of defense in an audit. The accountant will be familiar with the taxpayer’s tax reporting and financial life. So, the accountant often can handle the first stages of an audit which includes an initial interview and document requests. During the initial stages of an audit our experienced tax attorneys can work with your accountant, or with you directly, to help frame and organize arguments for allowing deductions and credits.
In our experience, many audits are resolved favorably by the accountant who prepared the return in question, and sometimes even by the taxpayer on his or her own. But when that does not happen, and the auditor proposes specific adjustments and will not agree to a reasonable resolution with the taxpayer and accountant, we are available to step in to pursue an appeal to the Appeals Offices of the IRS or MDR or tax litigation in court.
If the IRS or MDR finds that your tax return was inaccurate in some way, it can lead to significant financial penalties. In addition to owing back taxes with interest, the IRS may impose an additional 20% penalty for understating the amount of taxes due. In some cases, that tax penalty may rise to as high as 40%.
If the IRS determines that you have engaged in fraud, then it may impose a civil fraud penalty equal to 75% of any tax that was not paid due to fraud. You may also be subject to criminal prosecution for tax fraud.
The potential consequences of an IRS audit are significant. If you have received an audit letter from the IRS or the MDR, then your best option is to consult with a Minnesota tax audit attorney. Your lawyer can review your documentation, develop a strategy for responding to the audit, and represent you in the proceedings, including negotiating an agreement regarding taxes due.
What Types of Audits Does the IRS Conduct?
There are three types of IRS audits – correspondence audits, office audits, and field audits. Generally, correspondence audits are the least serious type of audit and are conducted via mail. Field audits are the most serious type of audit and are typically conducted at the business’ location.
No matter what type of audit you are facing, it is vital to consult with an IRS audit attorney. A lawyer can review your options and help you decide on the best way to handle the audit. In Minnesota and Western Wisconsin, contact Pridgeon & Zoss to schedule a discounted consultation about your IRS audit.
What Should I Do If I Get an IRS Audit Letter?
If you receive an audit letter from the IRS or the MDR, then you should contact a tax audit attorney as soon as possible. Even for a relatively straightforward tax issue, it is a good idea to talk to a lawyer to get an understanding of your options for handling the matter. During an initial consultation, an IRS audit attorney can advise you as to whether it is cost-effective to hire a lawyer for your audit.
At Pridgeon & Zoss, our practice is dedicated to representing people who are facing tax audits. If you are being audited, reach out today to schedule a consultation with a member of our team.
Can I Win an IRS Audit?
It is possible to “win” an IRS audit, which basically means that the IRS determines that your taxes are accurate and does not assess any taxes or penalties. However, successfully getting through an audit can be a challenge, particularly when there are irregularities in your taxes. A seasoned IRS audit attorney can help you with the process.
Sometimes, the best resolution to an audit is to work out a deal to pay the money that you owe through an offer in compromise or an installment agreement. Your tax audit attorney can review your available options and give you a realistic sense of the potential for success in an audit. Call Pridgeon & Zoss today to schedule a consultation with a Minnesota tax lawyer.
Experienced Minnesota Attorneys Handling IRS Audits
There are few things scarier in life than being audited. Even if you believe that you did everything right, the reality is that tax law is complicated. Having an IRS audit attorney by your side can give you peace of mind in knowing that your rights and interests are protected.
With offices in Edina and St. Anthony, the attorneys of Pridgeon & Zoss advise and represent clients throughout Minnesota and Western Wisconsin. We work collaboratively with each of our clients to develop a smart strategy for dealing with audits and other tax issues. If you have received an audit letter from the IRS or the MDR, you can reach us at or 952-835-8320; or fill out our online contact form to schedule a consultation with an MN tax lawyer. We offer an initial consultation discount so we can learn about your tax problem and explain your options to you.