Audit Defense and Representation
Individual and Business Audit Defense
Strategic Financial CPA Services provides audit defense and representation services for both individuals and businesses. With experience as former tax auditors, our audit team leverages our knowledge to provide you with a technical resource for tax deficiency analysis and strategy development.
Being under audit and potentially owing the State or Federal government more money than expected is stressful and can get worse if you work directly with the auditor; you may unknowingly open yourself up to more questioning and issues by navigating an audit without the services of experienced CPA’s.
We are experienced in negotiating offers in compromise, settlements, appeals, and protesting audit findings. We evaluate client’s ability to pay audit liabilities and negotiate payment options as well.
What happens if you receive a notice from the IRS?
Each year, the IRS sends millions of notices and letters to taxpayers to notify them of a proposed change to their account or asking for additional information or support for their tax return. Most notices are computer generated and are very specific in nature; the IRS will question a specific area, schedule, or line-item on the return.
These notices are time-sensitive and will have a deadline which a response is due. It’s very important that all deadlines are met, and satisfactory support is provided to help the IRS make an accurate decision on the matter or you may jeopardize owing additional liability. You should immediately contact us if you received a notice from the IRS to ensure it’s handled effectively.
Since the IRS receives millions of tax returns annually, they heavily rely on the information submitted to them from 3rd parties (your employer, investment/brokerage firms, mortgage lenders etc.) and compare this information to the information filed on your return. When the IRS compares the information, if there’s any material differences in income or deductions, you will receive a notice. Unfortunately, the information submitted from 3rd parties may be inaccurate or missing a key part which will result in the IRS sending a computer-generated notice.
Some frequently reoccurring issues are:
Selling a security at a loss
A very common issue is when someone sells a security (stock, bond, mutual fund, etc), not all the information on this transaction is submitted to the IRS. Often, only the proceeds from the sale are sent to the IRS without the cost basis associated with the purchase. This will make this sell of the security appear like additional taxable income and the IRS picks this up regularly.
An example is if someone purchases a security for $10,000, and then sell the security for $9,500; they have a realized loss of $500. The IRS receives information from your brokerage firm that proceeds of $9,500 were received on the sale, but the cost basis of $10,000 is not communicated by the brokerage firm. If the taxpayer did not claim the $10,000 cost basis on their tax return, the entire $9,500 appears to be all taxable gain on a security.
Retirement rollover issues
Another simple but very common issue is when someone transfers there 401(k) or IRA from one account to another account without showing this on their return. The retirement firm or trustee that housed the original account will notify the IRS of the withdrawal (through form 1099R) but does not notify them of where the money went. The IRS assumes the funds are a taxable withdrawal since they were never informed the money was rolled over into another retirement account.
Important reminder: It’s important to address any notice from the IRS timely and accurately, even if you believe the IRS is wrong, never disregard any notice you receive from them. Also, always be cautions of phone calls from people claiming to be IRS agents or requesting additional information from you over the phone. The IRS rarely ever calls taxpayers to resolve issues and the majority of these calls are scams.