Tax Controversy & IRS/State Audit Representation

Service description

A qualified representative handles the business's dealings with the IRS when it is audited, receives a notice, or disagrees with a proposed change to its taxes. The representative speaks with the IRS on the business's behalf, gathers support for the return, and pursues an agreement or an appeal if the two sides differ. Federal rules set who may represent a business before the IRS.

Common industries

Any business or owner contacted by the IRS, in any industry and at any size.

ROI

Skilled representation can reduce assessed tax, penalties, and interest, and resolve a dispute faster than going it alone.

Benefit

Professional representation before the IRS or a state agency for audits, notices, and disputes — you don't face the examiner alone.

Why get it

The IRS can examine a return, and a business that faces an audit alone risks conceding items it could have supported. Federal law lets a taxpayer be represented in IRS interviews and to consult a representative at any point, so a qualified professional can take on the contact.

When you benefit

One-off: the engagement lasts through the audit, notice or dispute and ends when the matter is resolved.

What it costs

Hourly or fixed-fee.

When you pay

Typically hourly with an upfront retainer, or a fixed fee for a defined step such as responding to a notice. Billing continues as the matter moves from examination to appeal, so the total depends on how long it runs.

Other costs

The cost of assembling records and, in some cases, of appraisals or other experts is in addition to the representative's fee. Any tax, penalties and interest ultimately owed are separate.

Risks to know

Responding late or inconsistently can lose the chance to settle at the first level. After a notice of deficiency, the business has 90 days to petition the Tax Court (150 days if the notice is addressed outside the United States), and missing that window narrows how the tax can be contested.

When risks arise

Exposure begins when the first notice arrives and is greatest in the early response window. The IRS can generally assess tax within three years after a return is filed, and longer in some cases, so an older return can still come under review.

The process

The representative reviews the notice and the return, gathers support and responds to the IRS on the business's behalf. If the IRS proposes a change, the business decides whether to agree, and the representative can pursue an appeal through the IRS Independent Office of Appeals or a petition to the Tax Court.

Your commitment

The business authorizes the representative in writing, gives access to the records supporting the return, and forwards every IRS letter promptly. It should tell the representative about any deadlines in the notices and any earlier IRS contact on the same issue.

Documents to gather

• The IRS notice or letter, with its response deadline
• The filed return under review and its supporting workpapers
• Books, bank statements and invoices behind the disputed items
• Earlier correspondence with the IRS on the same matter

Helpful reading

• IRS audits — Internal Revenue Service
• An overview of the Taxpayer Bill of Rights — Internal Revenue Service
• Independent Office of Appeals — Internal Revenue Service
• Taxpayer Advocate Service — Taxpayer Advocate Service (IRS)

Further research

• 26 U.S.C. § 7521 — Taxpayer interviews
• 26 U.S.C. § 6212 — Notice of deficiency
• 26 U.S.C. § 6213 — Tax Court petition
• 26 U.S.C. § 6501 — Limits on assessment
• 31 CFR Part 10 — Practice before the IRS