An audit can be a time-consuming process. While you cannot avoid a tax audit, you can minimize your risk of an audit by avoiding potential flags on their tax return. The most frequent IRS audits are caused by inconsistencies or errors in your tax return that raise red flags in the eyes of the IRS.
When you work with Milikowsky Tax Law, you get more than an experienced tax litigation attorney. You get an experienced business and tax advisor who can work with you to reduce your chances of being audited, with our comprehensive tax return assessment system and years of business experience.
California’s Top IRS Audit Attorney
Our leading tax litigation attorney, John Milikowsky, has decades of experience representing countless businesses in legal tax matters. Mr. Milikowsky is dedicated to relentlessly defending his clients in everything from state and federal tax audits to criminal tax investigations. As a full-service tax law firm, we frequently work with business owners to empower owners to identify issues on their own tax returns. While there is no way to guarantee you will avoid a tax audit, we can teach you to significantly minimize your risk of an audit.
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Milikowsky Tax Law Defends Businesses in IRS Audits
When you’re faced with the formidable presence of a tax audit, don’t panic. Reach out to Milikowsky Tax Law, and we will protect your company to keep your business in business. Our skilled tax litigation attorneys will protect your rights every step of the way.
Whether you’ve just received a letter from the IRS, or you need help analyzing your legal rights and financial data reported on your tax returns, contact us today. The team at Milikowsky Tax Law is here to help.
San Diego Tax Attorney – Your Relentless Advocate in IRS Audits
Business owners may not be sure where to start if IRS audits their company. However, an IRS audit doesn’t have to overwhelm your life or impede your ability to conduct business. With the experienced team at Milikwosky Tax Law, you can navigate the process of an IRS audit secure in the knowledge that your tax attorneys are advocating for you every day.
There is little to no margin for error during an audit, a tight timetable, and potentially severe consequences for a poorly handled interaction with IRS. Unlike CPAs who do not have attorney-client privilege, attorneys are able to speak with your IRS officer on your behalf without risk of subpoena or summons of records discussed. A qualified attorney can, review your documents with an expert eye, create the right strategy for you, represent you or your business, and provide valuable advice and guidance.
If you receive a letter from IRS confirming your business tax return has been selected for examination, review your return and identify the items that will likely be investigated so you can be prepared. Then, before communicating with IRS, reach out to an experienced IRS audit attorney. Having a game plan is critical. You want to be honest and prepared when speaking with your IRS revenue agent.
Anytime you file taxes, there is a chance that your tax return might be audited by the Internal Revenue Service (IRS). The agency conducts standard procedures to find any errors or discrepancies among taxpayers. The audit process is meticulous and, should you find yourself under the scrutiny of IRS, will require detailed information from you.
In the article below, you’ll learn about the audit process and frequently asked questions surrounding IRS audits.
Why was I selected for an IRS Audit?
There are different reasons you may be flagged for IRS audits. Some are due to random checks; however, you have a low chance of being audited this way. Most taxpayers have less than a 0.6% chance of receiving a random audit check.
IRS runs tax returns through its Discriminant Information Function (DIF) system to continually update their database and make sure they are tracking industry benchmarks for each industry and tax bracket.
The DIF system also checks for incorrect tax filing information. Any discrepancies in tax forms, such as an imbalance of tax returns, a discrepancy between reported earnings and employer filings, or unreported cash transactions by one member of a transactional party, will trigger DIF to send your return to an IRS audit officer.
People are more susceptible to an audit if they:
- Earn less than $25,000 or more than $500,000
- File incorrect or incomplete returns
- Have large numbers of cash transactions
- Claim a disproportionate number of deductions
- Are self-employed
- Have a home-based business
- Have a cash business
- Have foreign assets
Sometimes you can be audited as a result of your business partners or investors going through an audit.
How Will I Know If I am Selected for an Audit?
You will know if you are selected for an audit if you receive a verified letter in the mail from IRS. They do not call to notify you about your audit.
What Do I Do If I’m selected for an Audit?
If you or your business are selected for an audit, make sure you read all of the information sent to you in your audit notification letter. The letter and accompanying information request packet will notify you as to what entity is being audited (business or personal) what year(s) are under review and who your auditor is. Once you know what IRS needs, make sure you collect all of the records and supporting documentation requested (but nothing additional). You will need to submit records from banks, vendors, and businesses you have worked with, invoices and pay stubs, payroll records, and medical expenses among other information.
Should I Hire an IRS Tax Attorney to Help Me?
We suggest contacting a qualified tax attorney to help guide you through your audit, to ensure you are timely, responsive, compliant, and do not unintentionally increase the scope of your audit to other areas of your business or personal finances that would otherwise remain unscrutinized.. There is little to no margin for error during an audit, a tight timetable, and potentially severe consequences to a poorly handled interaction with IRS. Unlike CPAs who do not have attorney-client privilege, attorneys are able to speak with your IRS officer on your behalf without risk of subpoena or summons of records discussed. A qualified attorney can, review your documents with an expert eye, create the right strategy for you, represent you or your business, and provide valuable advice and guidance.
How long do I have to reply to an IRS audit?
You have 30 days to reply to the initial audit letter. Do not hesitate, and make sure you take the appropriate steps early on. IRS is not likely to provide extensions unless you have a good reason. Your attorney can help by advocating for more time with the IRS agent. A good attorney will know many of your local IRS auditors and have strong relationships built on well-structured prior cases and mutual respect.
How Long Do Audits Take?
The time it takes to conduct an audit depends on the case. It fluctuates depending on:
- The seriousness of the tax reporting error
- When and whether the right information is provided to IRS
- Communication between the person being audited and IRS officer
How Many Years of Tax Returns Can IRS audit?
IRS audits tax returns from the past three years; however, most are from the past two years. Only when IRS agents find discrepancies within the audit they are conducting do they dig for information older than three years. Most audits do not look for information past six years. Though in cases of criminal audits IRS can look back 9 years and longer.
If you or someone you know received an audit letter from IRS, reach out to our expert team at Milikowsky Tax Law. We have over a decade of experience working with IRS and tax audits and are experts in defending business owners in the face of IRS or other government agency audits.
IRS Audits: Why You Should NOT Cheat on Your Taxes
There’s a common myth that you can cut a few corners on your taxes, fudge the numbers, or take some liberties with deductions, especially if your business isn’t a household name. But here’s the truth: cheating on your taxes is a short-term game with long-term consequences, and we may be entering a new era of increased IRS scrutiny.
With the current administration in place until 2028 and the next likely to bring new energy to IRS enforcement, the risk of getting caught, whether it’s next year or five years from now, is growing.
Here’s what every business owner and entrepreneur needs to understand about IRS audits, the statute of limitations, and how to protect yourself through smart, honest accounting.
What Is the IRS Audit Statute of Limitations?
The statute of limitations refers to how long the IRS has to audit your tax return. Many people believe that once a couple of years go by, they’re in the clear. That’s not necessarily true.
Here’s what the IRS allows:
3 years is the standard timeframe the IRS has to audit your return.
6 years applies if you underreport your income by 25 percent or more.
No time limit applies if you never file a return or if the IRS suspects fraud.
So even if you filed your return in 2022, you may still be subject to audit through 2025, or even 2028, depending on what is discovered.
The IRS Is Being Re-Funded, and They’re Paying Attention
Under the Inflation Reduction Act of 2022, the IRS received a historic funding boost. While future administrations may adjust this funding, the current trend is clear: audits are becoming more frequent and more sophisticated.
This doesn’t just impact billionaires or major corporations. The IRS has signaled its focus includes:
A Complex Economic Environment Makes Mistakes More Likely
In today’s business climate—marked by inflation, shifting markets, labor shortages, and fast-changing tax laws—it’s easier than ever to make a mistake. But the IRS doesn’t always distinguish between honest mistakes and negligence.
Business owners need to be especially diligent about:
Poor bookkeeping increases your tax risk and invites unwanted attention from the IRS.
What Triggers an IRS Audit?
You don’t have to break the law to end up on the IRS radar. Common red flags include:
How to Work With Your CPA to Stay Out of Trouble
A CPA is more than a tax filer. They are your partner in preventing risk and making sure your business stays compliant.
Here are five ways to work with your CPA effectively:
Tell your CPA everything. Holding back information only increases your exposure.
Use accounting software or hire a professional. Your return is only as accurate as the data you provide.
If you’re unsure about deducting something, ask. Don’t assume it qualifies.
Keep digital copies of receipts, contracts, and invoices tied to deductions. You won’t need them unless you do, and then it’s too late to recreate.
Good CPAs don’t just file taxes, they plan for them. Proactive advice can help reduce your tax burden without crossing the line.
The Bottom Line
Shortcuts on your taxes may seem tempting in the moment, but they can turn into expensive mistakes years down the line. With a newly funded IRS and an increasingly complex tax environment, there’s no room for guesswork.
Be honest. Be thorough. And work with professionals who help you do it right the first time.
If you haven’t had your tax strategy reviewed in the last few years, now is the time. A second opinion today can save you a serious audit tomorrow.