Why Experience Matters Series - Part 2
An experienced taxpayer representative will determine who sent an IRS Letter, what is being asked, and provide an adequate and timely response on what is at issue.
If you receive a letter from Examination, the examiner is seeking information to answer questions about the correctness of a return. An exam letter will tell you which items are in question, ask for information related to the items at issue, and provide a deadline for a response. If you receive an examination letter, you will want to consult a representative who understands an exam letter needs to have an adequate response by the response date in the letter. Not responding in a timely fashion to an Examination letter makes an audit too easy for the examiner. The examiner can simply make the adjustment, send an audit report, and move on. At this point, a taxpayer and representative will be scrambling to catch up and having to decide whether to prepare a Protest to go to Appeals, pay the tax, or perhaps cajole the examiner to restart the exam. You want to make an examination easy for the examiner, but not this easy.
Upon receipt of an examination letter, you want a representative who understands what is being asked and what kind of information is necessary to adequately respond to items at issue. As an examiner myself, sometimes I sent an audit letter with a document request and had a representative simply send back an envelope of general information with no explanation expecting me to figure it out. However, that approach often allows an examiner to put in the workpapers that the taxpayer did not provide an adequate response, disallow whatever issues are being examined, make the adjustment, and send out an audit report. Then if the audit report is not protested (a taxpayer’s right), an examiner will simply close the case to the 90-Day shop to issue a Statutory Notice of Deficiency. At that point Collection will swoop in and start demanding payment of the tax due from the audit report. An experienced representative would never expect the examiner to do the accountant’s job.
The examination process is basically two-fold. First, you want a representative who understands that if the issue is income, the IRS needs to provide substantiation that income should be changed. Second, if the issue is an expense, the taxpayer’s burden is to substantiate any expense. Whether an exam letter concerns income or expense, I can help.
Read Part 1 - Experience Intro
Part 2 - Examination Letters
Read Part 3 - Examinations of Income
Read Part 4 - Examinations of Expense
Read Part 5 - Collection Letters