If there’s one thing taxpayers in California hate more than paying taxes, it’s probably responding to a tax audit. And it’s not just the prospect of having to pay additional taxes or penalties that’s the scary part. Instead, it’s providing documents and other information requested by the IRS or the California Franchise Tax Board (FTB). Not only is it a major hassle and inconvenience, but it can be confusing as well. So it’s understandable that anyone subject to a tax audit might wonder if getting outside help is a good idea.
Should You Hire a CPA or Tax Attorney?
Depending on the reasons for the audit, either tax professional can potentially help. A CPA, or certified public accountant, is ideal if you need assistance with the nuts and bolts of taxes and/or accounting. Besides handling your audit, this might include tasks such as:
- The preparing and filing and taxes
- Figuring out the tax implications of a business decision
- Reviewing financial records
A tax attorney might be more suited to handle your audit if involves potential legal liability or you anticipate your tax issue may end up in U.S. Tax Court or California Superior Court.
When You Might Want a Lawyer to Help During an Audit
If you’ve been audited by the IRS or FTB, you might be able to handle the audit yourself. Much of the audit process consists of you producing documents in response to the tax authority. But there are several situations where hiring a tax attorney to help with your audit might be a good idea.
First, the tax auditor is misbehaving. This will probably be subtle and could involve the auditor asking for information the auditor isn’t entitled to. Or maybe the auditor is misrepresenting the law or facts in an attempt to trick or coerce you into doing something you don’t have to do.
These sort of improper acts are unlikely. However, without a tax attorney reviewing your case, you may have no idea that the auditor is acting unlawfully or is asking for something you don’t have to provide.
Second, the auditor accuses you of a tax-related crime, such as tax evasion or tax fraud. Remember, an audit is basically a tax authority going to you and saying, “you’re claiming X, Y and Z on your tax return. We want additional information from you to justify what you’re claiming.” As long as you provide the information to support your tax claims, you’re fine.
But what happens if you can’t provide the information as requested? If the problem identified by the tax auditor is the result of an honest mistake, criminal charges aren’t likely. But if the auditor thinks you deliberately falsified information on your return or intentionally tried to conceal information, then you risk criminal penalties. So hiring a tax attorney is strongly recommended in these situations.
Third, you want someone to handle your tax audit for you and communicate directly with the IRS on your behalf. You don’t have to hire a tax attorney do to this, but depending on the complexity of your tax situation and potential legal issues, it might be best to hire a tax attorney.
Most tax audits in California involving the IRS or FTB don’t require a lawyer. And in some audits, a CPA might be best suited to assist you. But if you think your tax dispute will end up in court (in a criminal or civil dispute), it might be a good idea to talk to a tax attorney. A tax lawyer can also be helpful if you want someone to communicate with the taxing authority on your behalf or you think your auditor is acting inappropriately during the audit.
The good news is Kienitz Tax Law is here to help you with your tax issues. Schedule your FREE consultation today!