Innovative Strategies For Winning Tax Controversies, Business Structuring And Estate Planning

Large Business, Small Business Tax Audit, Individual Tax Audits

The IRS has three main types of audits:

Large Business and International

The Large Business and International section of the IRS (formerly the LMSB -Large Mid-Sized Business Section) is attacking businesses with assets of $10 million or more.Usually, the IRS comes in with a team of auditors. Your business should have its own team, lead by the Tax Attorney, working with your CPA and in house Controller or Financial Manager. As soon as your receive  the IRS audit notice, also called an “Information Document Request,” immediately call your Tax Lawyer.
the IRS plans to expend 18% fewer staff hours auditing large businesses with assets of more than $10 million in fiscal year 2013 (which ends Sept. 30) than it did in FY 2011. These lower numbers do not take into account the effects of budget cuts that resulted from the sequester.

Small and Mid Sized Business Audits

Just because your business is classified as a “Small Business” does not mean the IRS Audit cannot be a brutal attack on the very survival of your business and financial existence. One of the first thing the auditor, called the “Revenue Agent,” will do is to try to convince you to talk and conduct the audit without a Tax Lawyer. That is a huge mistake! How the audit is conducted determines the outcome. Don’t expect the tax attorney to somehow magically correct the mistakes on Appeals or in Tax Court.

Note: The IRS has increased mail audits of small businesses. The auditors are not Revenue Agents. They have much less training than typical Revenue Agents and make the audits much more difficult because they do not understand business. These minimally trained people are especially difficult to work with and the rarely understand business.

Wealthy Individual Audits

The IRS has created a specialized audit group known as Global High Wealth Industry Group,  This audit group attacks wealthy taxpayers with complicated financial arrangements. These rigorous probes emphasize hedge-fund managers and other investors it suspects may be trying to evade taxes. Included in this group are individual with asset protection trusts, royalty and licensing agreements, revenue-based or equity-sharing arrangements, private foundations, privately held companies and partnerships. The IRS auditors are specially trained and highly experienced. They conduct the audits in the same fashion as a Large Business audit.

Please seek legal advice if facing an IRS audit. You can contact Ronald J. Cappuccio, J.D., LL.M. (Tax) by calling 856-665-2121 or by sending an email.