Shah LAW Firm, PLLC

People often think of "red flags" or "audits" as a four letter word. The algorithm used by the IRS to identify red flags that result in a form of audit is almost as obscure as the algorithm used for Google's search function. A "red flag" is an informal term - but a real concept - it occurs when the IRS feels something on your tax return doesn't jive with other taxpayers. An "audit" is just a process that is initiated by the IRS to clarify some of those line items. Unfortunately, if the IRS feels one line item on your tax return is "off," then it opens your entire return - and checks virtually everything on your return. The cost of a taxpayer to get through an audit can be substantial - legal fees, additional tax, penalties and interest. An audit, therefore, is something you should not take lightly.  

It is important to choose your audit representation wisely. Those willing to represent you in an audit come in several shapes and forms. They have different credentials and ethical standards. The work product varies just as much.  When you engage with someone who will represent you, think of the following:

1. Centers of Expertise by Professional Type
2. Check the credentials
3. Top 5 "red flags"
4. Types of IRS audits
5. Neeraj's hat trick - CPA, attorney and MBA
6. Strong Ethics

Check the Credentials of your Tax Professional. There are various types of tax professionals - and each have different levels of representation rights. Here is a summary of each. 

• Attorneys - licensed by state courts. These are individuals earned a law degree AND passed a bar exam. Any information you share with an attorney is privileged (even with the IRS). Attorneys have unlimited representation rights before the IRS - audits, payment/collections and appeals.

• Certified Public Accountants (CPAs) - licensed by state boards. These individuals completed a program of study in accounting AND passed the CPA exam. CPAs, like attorneys, have unlimited representation rights before the IRS - audits, payment/collections and appeals. However, CPAs only have limited confidentiality with respect to the information you share with them.

• Enrolled Agents (EAs) - licensed by the IRS. These individuals passed an IRS Enrollment Exam. 

Beware of those national tax preparation chains. You know the ones - the seasonal tax preparers who have limited qualifications and experience - but give themselves fancy titles. Few, if any, are licensed CPAs and certainly none are both CPAs and attorneys (like yours truly)!

Beware of those individuals attempting to suggest that they are CPAs just because they worked for a CPA firm. Look at the credentials individuals place after their name - that's the best identifier of somebody's qualification.

Neeraj is certainly a qualified preparer - he has the hat trick - a CPA, an attorney and an MBA!

FIRST OF ALL - Always remember, the IRS never initiates contact via phone or email. It generally sends letters to the taxpayer via USPS regular mail, and USPS certified mail. If you are unsure whether a communication is authentic, it is best to contact the IRS directly.

The most common types of IRS audits are:

• Correspondence Audits. These are the most common form of audits examination (by mail). These letters often ask for additional information to substantiate a line item. 
• Online Audits. The IRS started this program relatively recently which uses an online portal to communicate with an IRS examiner.
• Office Audits. These letters "invite" you to an IRS office to discuss the matter.
• Field Audits. The most invasive type of audits - because these audits occur on-location!

You may want representation to navigate the audit process and communicate with the IRS. Neeraj can assist in all of the above-mentioned audits.

Taxpayers are ultimately responsible for all the information on their income tax return. This is true regardless of who prepares the return. Having an ethical preparer will give you confidence on the content of your return. It is 100% better for all parties involved to place ethics as priority #1. Don't try to pull a fast one on the IRS.

Neeraj does not compromise one bit on ethics – always following rules to the “T” and expects clients to have the same mentality. No exceptions!