The majority of Tax Attorneys have never prepared a tax return other than their own. In over 20 years I have met very few Tax Attorneys who have prepared a corporate tax return and they were always CPA’S. In a business tax audit, it is essential to understand the mechanics of accounting, debits, credits, the effect loan forgiveness has on income, how shareholder distributions affect retained earnings when the account is negative and whether or not this could trigger the accumulated earnings tax on retained earnings.
The list is endless………but, the one thing I know is you should always go into an audit with a professional who understands the results and operations of your financial statements; one who can pick apart the most intricate details within those financial statements AND a professional who knows how to argue case law to justify the actions of your tax preparer……otherwise you are fighting a major battle with one hand tied behind your back.
At Hutto & Associates, we promise that you will always have a professional who is both a 20 year plus Certified Public Accountant and a Litigation Attorney who is certified to go into the United States Tax Court.
Tax Law is really not complicated, but if you are going to be represented by someone before the IRS, your representative better know the one-thousand-and-one tricks of the trade to survive and produce a winning result. Remember, IRS auditors are not CPA’s or Lawyers unless they are involved with a special audit division of the Service. Here is the step by step process for your review if you ever have to endure an audit from the IRS.
You are Notified by the IRS that you may owe additional tax
As part of the tax collection process, the IRS is required to send taxpayers a series of letters. The final letter states that if the IRS tax debt isn’t paid in the next 30 days, the IRS has the right to take collection actions such as a bank levy or wage garnishment.
If you don’t agree with the amount the IRS says you owe, the first option you have is to dispute your tax liability with the IRS department of appeals. This is known as a “public collection due process hearing.”
Collection Due Process (CDP)
CDP procedures are available to you if you’ve received any one of the following notices:
- Notice of Intent to Levy
- Notice of Federal Tax Lien
- You have 30 days to request a hearing to preserve your right to go to Court.
- Complete Form 12153, Request for a Collection Due Process or Equivalent Hearing
- It is important you identify all your reasons for your disagreements.
- The completed Form 12153 should be sent to the same address that is shown on your Lien or Levy Notice.
- If your request is not received within 30 days, you are still entitled to an Appeals hearing. However, if you still disagree with the Appeals determination you cannot go to Court.
When do I take my tax dispute to Tax Court?
If you disagree with the IRS findings, they will send you a Notice of Deficiency, which is called a 90-day letter. This means that you have 90 days to file a petition with the United States Tax Court. The tax court is 19 judges who travel to all 50 states. These cases are not tried before a jury.
It is not necessary to pay the tax assessed before going into tax court. This Court will decide your case based on technical analysis only. We don’t argue policy in this Court.
You can go to U.S. District Court
If your argument is based on equity and fairness, then you have another option other than Tax Court; you can apply to the U.S. District Court. You will have a jury in this court, but you must pay the tax first before you file your petition. The judges are not tax experts so don’t expect to win on the technical aspects of the rules.
District Court decisions are appealed to the U.S. Court of Appeals and if you don’t win there, you can Petition the U.S. Supreme Court.
You can go to U.S. Court of Federal Claims
This is a special Court that hears various claims against the United States. This is probably not the best forum for Taxpayers because you have to pay the tax upfront and the judge is not a tax expert, therefore most Taxpayers are better off going to Tax Court.
There will be a fact-finding hearing before a trial judge in a nearby city relative to you. The trial judge will file his/her recommended decision in your case. But, decisions can be appealed to the Circuit Court of Appeals and then to the U.S. Supreme Court.
The only reason to go to this Court is for forum shopping purposes. The country is divided into many different circuits geographically. Judges in each circuit are allowed to rule on your case based on the precedent found within that circuit. Not all circuits follow the same law because prior rulings within the circuit are based on precedent and the judge has to follow that precedent. If the U.S. Supreme Court feels the different rulings are creating a conflict in the law and it is important, then they may elect to hear your case.