When a person is notified that he or she has been selected for a tax audit, a qualified representative may make the difference between the person paying thousands of dollars or possibly facing criminal charges. While certified public accountants are trained on how to audit a tax return, they should not be chosen to represent taxpayers in tax controversies before the Internal Revenue Service. There are a number of different types of matters that should prompt a taxpayer to seek help, including voluntary disclosures, innocent spouse matters, collections, asset forfeitures, complex examinations, penalty relief cases and any cases that have the potential for criminal prosecution.
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Voluntary Disclosure Cases
People who are out of compliance with tax laws may make voluntary disclosures to the IRS in order to get back into compliance. This may involve reporting taxes for years in which no income tax returns were filed or disclosing previously unreported foreign bank accounts. When a person makes a voluntary disclosure, his or her representative should secure an agreement from the IRS that no criminal charges will be filed. A good representative will also not allow the taxpayer to be questioned by the IRS. With questioning, the IRS may be able to elicit statements that it needs to prove that the person’s actions were willful. If it does, then the penalties the person might face will be significantly higher. Without an agreement to not pursue criminal prosecution, the person may also face incarceration if he or she is convicted.
Enrolled Agents, CPAs and Lawyers
Some people choose to be represented by enrolled agents in their tax controversies. Enrolled agents are allowed to represent small businesses and individuals before the IRS. In order to become an enrolled agent, the person must take and pass an exam. Enrolled agents do not have any educational requirements, so they may not be the best choice for IRS representation. Similarly, lawyers who do not have a background in practicing tax law may also not be appropriate choices for representation in a tax audit. People who are embroiled in tax controversies with the IRS may want to check the experience of any representatives that they are considering before they hire them. Choosing a qualified tax representative may help to save the person thousands of dollars, and it may also help him or her to avoid the potential for criminal charges.