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CPAs: Why Your Client Needs a Tax Attorney

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As a CPA you are an expert at advising your clients on tax optimization, business transactions, and all elements of their financial health and well-being. But, what do you do when your client is being audited? 

If your client is being audited, whether civil or criminal, you need an expert Tax Attorney. 

Why Your Client Needs an Expert Tax Attorney

Your Client Has a Tight Deadline

In the event of an IRS or EDD or other government entity audit, your client will have a limited time frame in which to respond. 

IRS will identify a deadline by which your client must respond to their letter. Generally, the revenue agent will give you 10 days to respond to the initial letter. This initial response serves the purpose of:

  • Contacting the revenue agent
  • Scheduling an appointment to provide the requested records 

Tax Attorneys and CPAs Can Partner to Provide Records

When a client has partnered with their CPA to maintain proper organization of all of their records, supplying requested documents is expedited. Once these documents are handed over, a CPA’s involvement can be reduced to the trusted advisor that the client relies on for guidance throughout all of their business dealings. 

One of the first steps in the audit process is the collection of various documentation for further information. IRS will likely request additional details on supporting documents such as:

  • Receipts
  • Bills
  • Legal papers
  • Employment documents
  • And more

The partnership between tax attorneys and CPAs is crucial to being able to meet the rapid turnaround deadlines in audits.

Tax Attorneys Can Help Prep Your Client for the Interview

During the first appointment, the taxpayer will go through an interview with their assigned IRS agent. The agent will walk through a whole litany of questions to understand such as:

  • The scope of what income looks like for the client
  • If they received an inheritance for instance
  • If they received any large transfers
  • Whether they have any cryptocurrency
  • And more 

The best practice is to contact a tax attorney to review the questions ahead of time. Credibility is one of your client’s most valuable assets during an audit. If IRS believes your client is being untruthful, perhaps as a result of being ill-prepared, they can launch a deeper investigation.

Tax Attorneys Can Help Prepare For the Bank Deposit Analysis

During a bank deposit analysis, IRS adds up all of the deposits from all of your client’s bank accounts: both personal and business. Once gathered, they compare the amount they calculate to the amount your client reported on their income tax return. 

A tax attorney can help ensure your client provides IRS with the correct documents to ensure the numbers match as closely as possible. 

The gap in reported pay versus actual pay sometimes occurs accidentally (or intentionally in the case of fraud) by miscalculating income because the client left out some income. If this occurs, it can lead to a gray area where the support of an experienced tax attorney will help defend the client’s business. 

Learn more about IRS looking into bank deposits here. 

Tax Attorneys Offer Attorney-Client Privilege

Attorneys have an attorney-client privilege that protects communication between a client and an attorney, which can restrict IRS and California State tax agencies from discovering information provided to attorneys in confidence.

Tax Attorneys Can Help to Protect CPAs From Subpoenas

Having the expertise of over 300 government audits allows our team to support your relationship with your client through the audit process while protecting you from being subpoenaed by the government entity performing the audit. 

Tax Attorneys Can Preserve Your Relationship with Your Client

The relationship with your client is the most important element to be preserved during an audit. Referring your client to a tax attorney is a good way to protect yourself from a client’s potential legal conundrum without ruining your existing relationship. 

As a CPA, one of the most valuable tools to have in your back pocket is a trusted relationship with a reputable tax attorney. This partnership enables you to better serve your clients, retain profitable clients long-term, and ensure that you’re legally protected. The partnership may create a reliable relationship to refer their clients for services outside of legal tax support, resulting in new clients for you.

Find out why tax attorneys are a CPA’s secret weapon.

Consider Milikowsky Tax Law

The Law Office of John D. Milikowsky is frequently called in by CPAs to support their clients in complex and stressful audit situations. Our goal is to keep your client out of trouble and keep your relationship intact. We do not file taxes or have CPAs in-house, all we do is support individuals and businesses in IRS and other government audits. 

If your client has received notice of an audit from IRS, EDD, CFTB, or other government entity, reach out to the tax experts at Milikowsky Tax Law immediately. We keep businesses in business.

Read on for more information about how to respond to an IRS audit, here.