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RJS Law - A Tax Law Firm

RJS Law: San Diego Tax Attorney & Lawyer | CPA | IRS | FTB | California

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SOUTHERN CALIFORNIA’S FINEST
LAW FIRM

COMPLIMENTARY CASE EVALUATION

SAN DIEGO
(619) 595-1655
ORANGE COUNTY
(949) 535-2000
El CAJON
(619) 595-1655
  • Home
  • About
    • Ronson J. Shamoun, JD, LL.M.
    • Chandara Diep, JD, LL.M.
    • Joseph Cole, JD, LL.M.
    • Brendan O’Connor, CPA, MST, JD, LL.M.
    • Ashley E. Teague, ESQ.
    • Brian M. Malloy, Esq.
    • Quinn Disparte, JD, LL.M.
    • Martin Schainbaum, JD, LL.M.
    • Melanie M. Shamoun
    • Sandie Portilla
    • Renae Arabo
    • Sabri P. Shamoun
    • Hilary Dargavell
    • Lupita C. Torres
    • Leandro Favano
    • Jewell Cornejo
    • Devon J. Arabo
    • Christopher Engelmann
    • Gwendolyn K. Davis
  • Services
    • Tax
      • IRS TAX MATTERS
        • IRS Appeals
          • IRS Appeals Process
          • Contesting an IRS Levy
          • Why Retain RJS Law for your IRS Appeal?
          • 4 Tips For Navigating The IRS Rapid Appeals Process
        • IRS AUDITS
          • IRS Correspondence Audits
          • IRS Field Audits
          • Initial Compliance Center Audits
          • IRS Office Audits
          • What to Expect During an IRS Audit?
          • Taxpayer Rights Under IRS Publication 1
          • IRS Warns Taxpayers About Scam
        • IRS Collections
          • Avoiding and Eliminating IRS Tax Liens
          • Collection Due Process Hearings
          • CP 501 – IRS Notice
          • Failure to file a tax return: What happens?
          • How the IRS calculates interest
          • How to get a tax levy released
          • IRS Automated Collections
          • IRS Collections Process
          • IRS Interest Abatement
          • IRS Revenue Officers
          • Jeopardy Assessments and Jeopardy Levies
          • National Tax Agencies
          • Our Approach to Collections
          • Statute of Limitations on Collections
          • Streamlined Installment Agreements
          • TAX PENALTIES
          • Tax Penalty Abatement
          • Taxpayer Assistance Orders
        • IRS Payroll Tax Matters
          • Independent Contractor Reclassification Audits
          • IRS Forms 940 and 941
          • IRS Trust Fund Interviews
          • Payroll Tax Liability Payment Options
          • The Trust Fund Recovery Penalty
        • IRS Wealth Squad
        • Offer in Compromise & Tax Settlements
          • OVERVIEW OF OFFER IN COMPROMISE PROCESS
          • The Offer in Compromise Process
          • Appealing a Rejected Offer in Compromise
          • How the IRS evaluates an Offer in Compromise
          • Offer in Compromise and Dissipated Assets
          • Offer in Compromise Requirements
          • Pros and Cons of an Offer in Compromise
          • Why Retain RJS Law?
          • Offer in Compromise Alternatives
          • Actual IRS Offer in Compromise Results
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        • EDD California Payroll Tax Lawyer
          • EDD Investigations
          • EDD Collections – Liens, Levies, and Garnishments
        • California Sales Tax
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        • California State Tax Matters
          • California Residency Audits
          • Discharging State Income Taxes in Bankruptcy
          • State Tax Practice – Outside of California
      • CRIMINAL TAX ISSUES
        • Criminal Investigation Division
        • IRS Criminal Investigation Division Tactics
        • Criminal Tax Defense – Tax Crimes
        • Currency Transaction Records & Suspicious Activity Reports
        • IRS Methods of Proof: Tax Fraud and Evasion
        • Methods IRS Agents Use to Locate Assets
        • IRS Special Agent Visits
        • Are You a Criminal Investigation Target?
        • Criminal Tax Attorney vs. White Collar Defense
      • International Taxes
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      • Innocent Spouse Relief
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WINNER OF THE UNION TRIBUNE SAN DIEGO'S BEST TAX LAW FIRM

 


5 YEARS IN A ROW

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  • Home
  • About
    • Ronson J. Shamoun, JD, LL.M.
    • Chandara Diep, JD, LL.M.
    • Joseph Cole, JD, LL.M.
    • Brendan O’Connor, CPA, MST, JD, LL.M.
    • Ashley E. Teague, ESQ.
    • Brian M. Malloy, Esq.
    • Quinn Disparte, JD, LL.M.
    • Martin Schainbaum, JD, LL.M.
    • Melanie M. Shamoun
    • Sandie Portilla
    • Renae Arabo
    • Sabri P. Shamoun
    • Hilary Dargavell
    • Lupita C. Torres
    • Leandro Favano
    • Jewell Cornejo
    • Devon J. Arabo
    • Christopher Engelmann
    • Gwendolyn K. Davis
  • Services
    • Tax
      • IRS TAX MATTERS
        • IRS Appeals
          • IRS Appeals Process
          • Contesting an IRS Levy
          • Why Retain RJS Law for your IRS Appeal?
          • 4 Tips For Navigating The IRS Rapid Appeals Process
        • IRS AUDITS
          • IRS Correspondence Audits
          • IRS Field Audits
          • Initial Compliance Center Audits
          • IRS Office Audits
          • What to Expect During an IRS Audit?
          • Taxpayer Rights Under IRS Publication 1
          • IRS Warns Taxpayers About Scam
        • IRS Collections
          • Avoiding and Eliminating IRS Tax Liens
          • Collection Due Process Hearings
          • CP 501 – IRS Notice
          • Failure to file a tax return: What happens?
          • How the IRS calculates interest
          • How to get a tax levy released
          • IRS Automated Collections
          • IRS Collections Process
          • IRS Interest Abatement
          • IRS Revenue Officers
          • Jeopardy Assessments and Jeopardy Levies
          • National Tax Agencies
          • Our Approach to Collections
          • Statute of Limitations on Collections
          • Streamlined Installment Agreements
          • TAX PENALTIES
          • Tax Penalty Abatement
          • Taxpayer Assistance Orders
        • IRS Payroll Tax Matters
          • Independent Contractor Reclassification Audits
          • IRS Forms 940 and 941
          • IRS Trust Fund Interviews
          • Payroll Tax Liability Payment Options
          • The Trust Fund Recovery Penalty
        • IRS Wealth Squad
        • Offer in Compromise & Tax Settlements
          • OVERVIEW OF OFFER IN COMPROMISE PROCESS
          • The Offer in Compromise Process
          • Appealing a Rejected Offer in Compromise
          • How the IRS evaluates an Offer in Compromise
          • Offer in Compromise and Dissipated Assets
          • Offer in Compromise Requirements
          • Pros and Cons of an Offer in Compromise
          • Why Retain RJS Law?
          • Offer in Compromise Alternatives
          • Actual IRS Offer in Compromise Results
      • STATE TAX MATTERS
        • EDD California Payroll Tax Lawyer
          • EDD Investigations
          • EDD Collections – Liens, Levies, and Garnishments
        • California Sales Tax
          • California Sales Tax Appeals
          • California Sales Tax Audits
          • California Department Of Tax And Fee Administration
        • California State Tax Matters
          • California Residency Audits
          • Discharging State Income Taxes in Bankruptcy
          • State Tax Practice – Outside of California
      • CRIMINAL TAX ISSUES
        • Criminal Investigation Division
        • IRS Criminal Investigation Division Tactics
        • Criminal Tax Defense – Tax Crimes
        • Currency Transaction Records & Suspicious Activity Reports
        • IRS Methods of Proof: Tax Fraud and Evasion
        • Methods IRS Agents Use to Locate Assets
        • IRS Special Agent Visits
        • Are You a Criminal Investigation Target?
        • Criminal Tax Attorney vs. White Collar Defense
      • International Taxes
      • CORPORATE TAXES
      • TAX COURT LITIGATION
      • Innocent Spouse Relief
    • Estate Planning
    • Trust, Estate & Probate Litigation
    • Trust & Estate Administration
    • Probate
    • Bankruptcy
    • Criminal Defense
    • Corporate & Transactional
    • Private Wealth Services
    • Real Estate Law
      • Landlord Tenant Law
    • Employment Law
    • NOTICES
      • IRS Notices
      • IRS Letters
      • FTB Notices
      • Avisos en Español
  • Tax Institute
  • Blog
  • Testimonials
  • Giving
    • RJS Law Donates Billboard to the Girl Scouts
  • Awards
    • Events
    • SD Metro San Diego’s Top Attorneys 2020
    • SD50 Extraordinary Leadership
    • Media
    • Video Gallery
    • USD Feature Story
    • Publications
  • Contact

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IRS Income Tax Audits Explained

IRS Income Tax Audits

An income tax audit is an examination of a tax return. Depending on the nature and scope of the audit, an IRS examiner may look at just a few items on your return or they may look at your return in its entirety. If they determine that certain items do not add up to the amounts reported on the return or that a position taken on the return is questionable, they will require you to justify that item. This outcome of this process can lead to one of three results: owing more tax, owing no additional tax, or in rare cases, receiving a refund.

Types of Audits

Correspondence Audit

The IRS uses correspondence audits to take care of the most common tax return problems, such as missing forms and schedules, illegible entries, and mathematical errors. These take place via mail and constitute the majority of the audits that the IRS conducts.

Office Audit

In an office audit, you go to an examiner’s office and present documentation and information, such as receipts, account statements, or pay stubs, in order to substantiate certain items on you return.

Field Audit

Field audits are the least common type of audit conducted by the IRS. During these audits, an examiner will arrange a time to visit your home or business to verify the information on your return.

Why Me?

Although recent IRS controversies may lead you to think that the IRS targets particular individuals or groups, this kind of behavior is an aberration. In reality, a piece of software called the Discriminant Inventory Function System (DIFS) analyzes tax returns. This software looks for variances between returns filed by similarly situated taxpayers and assigns each return a score based on its deviation from the average.

Example         If the DIFS determines that the average unreimbursed business expense claimed by taxpayers who work in construction is $1,000 and you claim $10,000 on your return, your return will be assigned a higher score, which may trigger an audit.

This scoring system has nothing to do with the correctness of your return. It merely operates under the assumption that returns with large statistical variance are more likely to contain errors than returns that are close to the average.

What should I do if I am audited?

Do not ignore your audit notice! This is a common mistake made by individuals who either do not understand the audit process or do not want to deal with the IRS. Once the IRS has chosen you for an audit, they will not go away. The worst thing that you can do is not respond. If you do not respond by the date on your notice, the IRS will likely assess more tax than you otherwise would have owed.

Example         A taxpayer is audited for not reporting a Schedule C business on his return. The business made $100,000 in sales and had $75,000 in expenses for the year. Rather than respond to the audit, the taxpayer throws away the audit notice. In cases like this, the IRS only has access to the amount of income that should have been reported. There is no way for them to verify whether any expenses were paid. Since the taxpayer did not respond to the audit, the auditor will only base the assessment off of the business’ income, which will result in tax being assessed on $100,000 rather than $25,000. 

In most small audits, as long you have good records and are able to explain why the amounts claimed on your return are correct, the IRS will close your audit with no changes. Larger audits, on the other hand, can be more cumbersome to handle. As a general matter, the larger the scope of an audit, the more aggressive the IRS will be in requiring substantiation of the items under audit. In these cases, many taxpayers turn to tax professionals for help.

The benefits of hiring a tax professional where an audit change can result in a large tax assessment can be immense. These individuals are keenly aware of not only the current state of the tax code, but also various strategies that can be implemented during an audit to obtain favorable results. In addition, tax professionals act as a barrier between you and the IRS. By having a tax professional represent you in your audit, you never have to see or hear from an IRS agent and you can be sure that the IRS will not take advantage of your unfamiliarity with both the audit process and the tax code.

______________________________________________________________________
Please keep in mind the information and advice presented in this blog is not intended to be used as formal legal advice. Contact a tax professional for personalized tax advice pertaining to your specific situation. While we try and answer all parts of the question when we write our blogs, sometimes there may be some left unanswered. If you have any questions about your problems with the IRS, SBOE, FTB, or BOE, or tax law in general, call RJS Law at (619) 595-1655.

Filed Under: IRS Audits, Uncategorized Tagged With: audit, audit irs, audit reconsideration, audit red flags irs, audit triggers, audits, avoiding audits, avoiding irs audits, business audit, franchise tax board audits, income tax audit, irs audit attorney, irs audits explained, representing yourself at an audit, sboe audit, state board of equalization audit, tax audit, Tax audits

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