Tax Attorneys – Tax Audit Defense

I am under a Tax Audit

Ansari Tax LLC is comprised of representatives of counsel with strong accounting backgrounds, Masters in Tax Law, and a dedicated focus to get our clients out of trouble with the Tax Authorities. Our firm represents clients and businesses being audited by the IRS and the Texas Comptroller. If you have not filed your personal, business, or employer’s quarterly returns, the IRS may have already filed Substitute for returns on your behalf. If you are lucky, they may not have yet assessed the tax against you, but are now looking for compliance. See us at any of our four offices across Texas.

If you area business owner, the Texas Comptroller might be looking for unreported sales tax. The method called “sampling,” is quite unfavorable to the business owner. It is where the Department takes your two highest months of under-reported sales tax, averages them out, and then multiplies by 12 (representing the calendar year). That times a 100% to 200% penalty is the total assessed tax liability.

26 U.S.C. § 1 : US Code – Section 1: Tax imposed

According to the Chapter mentioned above, residents of the U.S. and citizens of the U.S. living abroad must pay taxes to the U.S. Revenue, unless they meet an exemption.

The U.S. Tax Code is by far the most intricate and complex law of the land. In general, taxable events give rise to a tax liability. A tax liability is then either paid to the IRS, disputed, or sent to the most powerful collections department in the country – ACS.

(A taxable event is any gain of wealth ie earning money through work or withdrawing money from a pension plan).

IRS Defense or IRS compliance?

When it comes to the IRS, the Fair Debt Collection Act will not come to your aid. When you call our firm, our number one goal is to get you compliant with the IRS. This allows us to work out options for you to be able to live comfortably and stay in the good books with the IRS. Our firm uses tools for IRS compliance as a defense mechanism to help our clients avoid levy’s and garnishments. Once you are IRS compliant, you are en route to freedom.

If taxpayers are unable to pay a tax debt in full and an installment agreement is not an option, they may be able to take advantage of an offer in compromise (OIC). Generally, an OIC should be viewed as a last resort after taxpayers have explored all other available payment options. The IRS resolves less than one percent of all balance due accounts through the OIC program.

What is an Offer in Compromise?

An offer in compromise is an agreement between a taxpayer and the IRS that resolves the taxpayer’s tax debt. The IRS has the authority to settle, or “compromise,” federal tax liabilities by accepting less than full payment under certain circumstances. A tax debt can be legally compromised for one of the following reasons:

• Doubt as to liability – Doubt exists that the assessed tax is correct.
• Doubt as to collectibility – Doubt exists that the taxpayer could ever pay the full amount of tax owed.

Effective Tax Administration – There is no doubt the tax is correct and could be collected but an exceptional circumstance exists that allows the IRS to consider a taxpayer’s OIC. To be eligible for a compromise on this basis, the taxpayer must demonstrate that collection of the tax would create an economic hardship or would be unfair and inequitable.

As the result of the issuance of the revised Form 656, Offer in Compromise (2/2007 revision), a taxpayer is now required to file a Form 656 — L, Offer in Compromise (Doubt as to Liability) when it is believed that the tax liability is incorrect, while Form 656, Offer in Compromise should be filed only when there is doubt as to collectibility that the tax liability could ever be paid in full, or under the basis of Effective Tax Administration (ETA). A taxpayer is no longer able to file offers concurrently claiming both that the tax liability is incorrect along with an inability to pay it.

Form 656, Offer in Compromise (2/2007 revision) also incorporates changes in the processing guidelines as the IRS will no longer investigate an offer for a tax year or tax period that has not been assessed. The IRS will return the offer back to the taxpayer if it is submitted solely for an unassessed tax year or tax period.

An additional benefit of submitting an OIC is that IRS Restructuring Act prohibits the IRS from collecting a tax liability by levy during the period in which the Offer is being processed, or 30 days following rejection of an offer, or during the appeal of an OIC. This time frame of non-collection is often a time for our clients to avoid IRS collection actions.

Is your business under a Texas tax audit?

Being notified and going through the procedure of a Texas tax audit can be a daunting proposition. The process begins with your receipt of Notice of Intent to Audit Books and Records, from the Texas Comptroller. The auditor will be looking for violations of Texas tax law and whether additional taxes, along with penalties and interest, can be assessed against you. You should understand from the start that an auditor’s job is NOT to help you accurately determine your tax liabilities. THE AUDITOR’S JOB IS TO FIND ADDITIONAL TAXES DUE. It is that simple. If the auditor can call into question an entry or record, then the auditor will do so – and usually project that one record across the entire 3 year audit period exponentially increasing your proposed Texas tax assessment.

Particularly with a business, the State will look for instances where your business has collected sales tax from customers but failed to remit all or part of these monies to the state. Collecting but not remitted Texas taxes (think Sales Tax or Unemployment Tax) is one of the worst possible things a business owner can do with regard to Texas taxes. If you consider penalties and interest to be painful, then you might be surprised to find out that collecting but not remitting Texas taxes can land a business owner in jail. Under Texas law, collecting but not remitting these “trust fund taxes” is considered stealing from the state and the business owner and employees can be charged with as high as a felony under certain circumstances.

Even if you feel you have been compliant, we strongly recommend that you do not represent yourself during as Texas tax audit. The Texas Department of Revenue auditors have many tricks up their sleeves that can limit your rights under Texas law. It is vital to have a knowledgeable and experienced tax professional to assist you through all stages of the audit, from the initial notice through to its conclusion.

Texas Tax Audit Protection

The State will ask to either do a “Desk Audit” in one of their offices or a “Field Audit” at your place of business. You should consider saying “NO” to either request, or better yet – let us say no for you. Do not let an auditor into your business; make the auditor come to your tax professional’s office. We know how to “control” the audit, so the auditor does not go on a “fishing expedition” (looking for ways to accuse your business of under paying taxes). These are commonly the types of Texas taxes that are audited, corporate income tax and others can come under State review. All auditors request certain records and ask questions regarding your business and accounting methods. Often the auditor will ask for things that (s)he has no right to demand or will ask the taxpayer to sign documents that the taxpayer does not have to sign. We know the games the Texas auditors play and how to defend against them.

The State auditor has the authority to assess additional taxes plus penalties and interest. They can also give your case over to the criminal investigation division. Texas auditors may be highly trained in tax law, but they have been taught to constantly suspect you are underpaying tax and ways to prove it. Don’t you want your tax professional to have greater knowledge and experience than the auditors, who are coming to your business to LOOK for ways to accuse you business of underpaying Texas taxes?