Working with an experienced tax attorney offers a variety of benefits for individual taxpayers as well as businesses. One of the most important benefits is reducing the chance that the IRS will target you for a tax audit.
Online investment advisor The Motley Fool crunched the 2015 IRS statistics to calculate the odds of an IRS audit. Although the chance is fairly small — less than one in 100 — the lucky recipients of the dreaded IRS audit letter are rarely selected at random. Instead, auditors are alerted by red flags in your tax returns.
By trusting an experienced tax attorney to handle your IRS filings and other tax-related activities, you can help remove some of these potential red flags.
Tax Attorneys Are Experts in Applicable Laws & Tax Codes
The U.S. tax code is now more than 75,000 pages containing more than 10 million words. (By comparison, “War and Peace” is about 560,000 words.)
Every year, the IRS makes thousands of changes to the federal tax laws. Tax attorneys must stay up to date on all statutes as well as IRS regulations, case law and clarifications. Some recent changes include modifications to filing deadlines, removal or expiration of certain tax breaks and changes in allowances for depreciated expenses.
Short of a few wonks and savants, it’s not possible for taxpayers to stay abreast of these constant changes. Consequently, you may misapply important deductions — or miss them completely. Financially, this can cost you more in tax liability.
Legally, it can get you in hot water with the IRS if you attempt to claim more deductions than you are entitled to. And that’s a big red flag for auditors.
Law Firms Prepare and Maintain Detailed Records
When you filed your own taxes in the past, did you remember to include your Form 8962? How about your 1095-C or Form 6251? What about your recordkeeping habits? Do you have copies of your returns along with all the supporting receipts, documents, etc., in easy reach?
If your IRS return requires some obscure schedule or tricky form, it’s more likely to attract the attention of an auditor — especially if you forget to attach that form or you fill it out incorrectly. What may seem like a foreign language to the taxpayer is a simple part of everyday life for an experienced tax attorney.
And because maintaining detailed records is a key aspect of the attorney’s duty to his or her clients, you will always know your files are complete and readily accessible. The IRS knows it too, which is why having a reputable tax attorney’s name listed as your preparer can help offset your risk of audit.
Tax Lawyers Handle the Important Details
It may seem overly simplistic to say that handwritten forms and simple arithmetic errors raise red flags for the IRS, but they do.
Missing the filing deadline or failing to request an extension may not seem like a big deal to you, but it is to the IRS. Tax attorneys make sure that these important details are addressed.
Being neat, being thorough and providing exactly what’s required (and no more) all help reduce your risk of being targeted for a tax audit.
Some of the IRS red-flag conditions simply can’t be avoided — if you made more than $10 million last year, for example, or if you qualify for a lot of deductions. However, it makes good financial sense to minimize any risks you can.
The Froisland Law Firm, in Salt Lake City, Utah, specializes in expert representation for tax dispute resolution, unfiled returns and tax planning. Contact The Froisland Law Firm today to learn more, and to schedule your complimentary consultation with an experienced Utah tax attorney.