What to do when your business and the IRS come head to head
By Stephen Werner, Esq. LL.M.
There are three common scenarios which will motivate you to read this article:
1. You are becoming worried that the review of your past, current, or future business taxes might trigger an investigation by the Internal Revenue Service.
2. Your business has been contacted by the IRS about a pending audit, and you don’t know what to do.
3. Your business has already been audited by the IRS, and the findings indicate you could owe thousands in back taxes, penalties, or both.
The first thing you should do is not panic.
The IRS operates on a statistical basis, and audits can be triggered by anomalies in year to year filings, by plain old errors on a filing, and even randomly. No one is “out to get you or your business”. Even if there are discrepancies you may or may not know about, your position and course of action are stronger than you may think.
Whether you have a bookkeeper, an accountant, or a CPA, it’s in your best interest to retain an attorney who knows Federal and Pennsylvania tax law.
At Scaringi Law, we have several attorneys who focus on both personal and business tax law. We prepare taxes on a regular basis, follow the tax law changes closely, and are fully qualified to represent our clients in the instance of an IRS inquiry.
Challenging the IRS is not an endeavor for the meek. While a tax preparation service may offer to “represent” you before the IRS, they won’t fight for you like an attorney. Commonly they will submit a simple Offer in Compromise. But in the Federal District Court, or in the Tax Court, you need an attorney who will go to the court in your defense.
The IRS wants you to admit to the findings, and agree to pay the tax. That is their goal. Even though you are confident your filing was done correctly, their audited tax bill seems exorbitant.
Disagreeing with the IRS, which is the first step in your goal of an equitable remedy, often leads to a filing a Petition in one of the judicial venues, which only an attorney can do.
In the case of Allen v. Commissioner, 128 T.C. 37 (2007), for example, the taxpayer correctly and completely provided all required tax-related documents to his tax preparer—W-2s, 1099s, mortgage interest statement, real estate tax information, and so forth. The tax preparer prepared and filed the tax returns as requested, but claimed false itemized deductions on Schedule A, including false deductions for charitable contributions, meals and entertainment, and other expenses.
Although it was the tax preparer who had conducted these activities, the ultimate liability was still on the tax payer. The Tax Court said, quoting from Internal Revenue Code, § 6501(c)(1), “The tax may be assessed at any time in the case of a false or fraudulent return with intent to evade tax.” The court noted that even though the tax preparer was 100% at fault, the taxpayer still owed the correct tax, as presented in the IRS audit.
The moral of this story, is using a Scaringi Law attorney as your tax preparer elevates your business to a higher standard. While a tax preparation service may be willing to “communicate” with the IRS in the instance of a discrepancy, only a licensed attorney can represent you in court.
Scaringi Law employs attorneys who are accomplished at business planning, formation, and the regular practice of taxation law. They are extensively trained, both academically and through years of experience.
If ensuring your business finances and relationship with the government are above all in priority, consider Scaringi Law. You don’t have to imagine the convenience of preparing and filing your business and personal taxes with one firm; the simplicity of organizing your business, optimizing your overall tax scenario, and having a team of attorneys able to solve other personal and business issues as they arise.
Why just think about it? You can count on Scaringi Law to represent you every step of the way, in any state or federal tax dispute.
Just remember, tax-day is fast approaching. If you’re not confident with the state of your personal or business taxes, we can file an extension for you right now. We’ll save you the stress and aggravation of facing potential fines, or worse, later, and we can fortify your peace of mind.
For more answers about tax preparation by a skilled Scaringi Law attorney, visit: ScaringiLaw.com/tax-law.
Scaringi Law attorney, Stephen S. Werner, offers expertise in both domestic and international business and tax law, as well as insurance law, securities law, investment broker-dealer law, and other areas. He has a Cum Laude Juris Doctorate from Widener University, School of Law, and a Masters in Taxation Law from Vilanova University, School of Law.