You received a letter from the IRS asking you to explain an item
This is called a "Correspondence Examination." Relax. Although it is an audit, it's really nothing more than the IRS asking you to explain an item on your Income Tax form. At this stage, you don't always need a tax attorney, although it's wise to get one at the earlier stages. If you have a sufficient explanation and you can document it, then send it in a letter to the IRS. You can also ask the accountant that prepared your form to have a look at the letter and let you know why they are asking about that particular item.
The IRS wants you to come in to their office
This is called the "Office Audit." It is certainly more intimidating than the correspondence audit, but it really shouldn't be any scarier than a trip to the dentist's office. The most important thing you need to do is to read the letter that the IRS has sent you. In this letter, they have listed the scope of this audit. When you arrive at the office, the Agent will ask you a series of questions. If, for any reason, the Agent goes beyond the scope of the letter, you can politely the Agent that you are not prepared to answer these questions.
Don't be a jerk to the IRS Agent. Remember that they have the power to make things very easy for you, if they want to. Conversely, they also have the power to make your life miserable. So just try to work with them.
At any time in the interview, you have the right to ask for your attorney. The IRS Agent must suspend the interview.
The IRS asks you to provide details about your financial status
Okay, now it might be time to start worrying. Still, breathe. Now, find yourself some competent tax counsel, preferably, a tax attorney.
The IRS might ask you to fill out a Form 4822. DO NOT fill out this form. It can be used against you.
Have your attorney present at the interview. Do not attempt to go to the interview alone.
The IRS has issued a summons
DO NOT IGNORE THIS! First, immediately seek counsel from a tax attorney. You should comply with the summons, even if you don't think it's proper.
You receive a letter from IRS Collections
This might be a letter stating that the IRS has filed a tax lien on your property, or it might be a letter stating that the IRS plans to levy your property.
Do not ignore this notice. You have certain rights to contest these liens and levies. Contact your tax attorney immediately.
You receive a Notice of Deficiency from the IRS
This is a time sensitive letter. You have 90 days from the date of this letter to file a petition in Tax Court.
At this point, you need to gather all of your relevant documents, including your Income tax form, and make that appointment with your tax attorney.
Although a Notice of Deficiency does not necessarily mean that you will have to go to court, an attorney can help you navigate through the maze of assessment, appeals and all other available options to you.
CIRCULAR 230 DISCLAIMER
Tax Advice Disclaimer: Any federal tax advice contained in this communication was not intended to be used, and it cannot be used, by you for the purpose of (1) avoiding any penalty that may be imposed by the Internal Revenue Service or (2) promoting, marketing or recommending to another party any transaction or matter addressed herein.
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