After an IRS Audit Happens, What Comes Next?
What Happens After an IRS Audit?
What Happens After an IRS Audit? An IRS Audit can be an exhausting undertaking. Depending on the facts and circumstances of the taxpayer’s (alleged) noncompliance, the Internal Revenue Service examination may take months or even years to finish. It is important to keep in mind that more often than not, an IRS Audit is not as bad as many attorneys try to make it out to be. While the audit process may be scary and overwhelming for the taxpayer — especially when there is a risk of offshore penalties involved — it is generally not that bad. And, after the process has completed, the Taxpayer generally has a few options. Which option the Taxpayer chooses will be based on the outcome of the audit, the proposed tax and penalties due, and how much time, effort and cost the taxpayer wants to put into the process.
After the IRS Audit — What Happens Next?
After the Audit by the Internal Revenue Service has ended, the Taxpayer will usually receive an IRS Form 4549.
What is Form 4549?
The IRS Form 4549 is the Income Tax Examination Changes.
The Form will include a summary of the proposed changes to the tax return, penalties, and interest determined as an outcome of the audit.
- Adjustments to Income
- Total Adjustments
- Taxable Income
- Corrected Taxable Income
- Additional Taxes/AMT
- Corrected Tax Liability
- Less Credits
- Other Taxes
- Total Corrected Tax Liability
- Total Tax Shown on Return
- Deficiency or Overpayment
- Balance Due
The Internal Revenue Service has agreements with state tax agencies under which information about federal tax, including increases or decreases, is exchanged with the states. If this change affects the amount of your state income tax, you should amend your state return by filing the necessary forms.
The IRS may order backup withholding (withholding of a percentage of your dividend and/or interest income) if the tax remains unpaid after it has been assessed and four notices have been issued to you over a 120-day period.
Do You Have to Sign the 4549?
No, the IRS cannot make you sign the form and accept the changes.
If you do not sign the Form 4549, the IRS will send you a Notice of Deficiency.
The Notice of Deficiency will provide you 90 days (150 Days if you are outside the U.S.) to respond by Petitioning the Tax Court.
Notice of Deficiency Options
As provided by the IRS:
“What this Notice is About
We received information that is different from what you reported on your tax return. This may result in an increase or decrease in your tax. The notice explains how the amount was calculated and how you can challenge it in U.S Tax Court.
What You Must do
- Read the notice carefully. It explains the proposed increase or decrease in your tax. Note: The amounts shown as due on the notice may not match your previous notice because you can’t challenge all items in U.S. Tax Court.
- If you agree with the changes, sign the enclosed Form 5564, Notice of Deficiency – Waiver, and mail to the address shown on the notice.
- If you don’t agree with the changes, you have the right to challenge the proposed changes by filing a petition with the U.S. Tax Court no later than the date shown on the notice. Please note the court can’t consider your case if you file the petition late.
- If you don’t agree with the changes and have additional information for us to consider, mail or fax the information with the Form 5564 to the address or fax number on the notice. Our review of the new information won’t extend the time you have to file a petition with the U.S. Tax Court.”
What is an Audit Reconsideration?
In some situations, a Taxpayer may seek to have a “reconsideration” of the the outcome of the Audit. The IRS does not have to grant the request for audit reconsideration, and it only occurs in certain situations.
As provided by the IRS:
“What is Audit Reconsideration?
An Audit Reconsideration is a process used by the Internal Revenue Service to help you when you disagree with the results of an IRS audit of your tax return, or a return created for you by the IRS because you did not file a tax return as authorized by the Internal Revenue Code 6020(b).
Reasons for a Request
You may request audit reconsideration if you:
- Did not appear for your audit
- Moved and did not receive correspondence from the IRS
- Have additional information to present that you did not provide during your original audit
- Disagree with the assessment from the audit”
Can I Appeal or Protest the IRS Audit Outcome?
Yes, when a Taxpayer does not agree with the findings of the IRS (not only limited to audits) they can appeal the outcome.
As provided by the IRS:
If You Don’t Agree
If you don’t agree with any or all of the IRS findings given you, you may request a meeting or a telephone conference with the supervisor of the person who issued the findings. If you still don’t agree, you may appeal your case to the Appeals Office of IRS.
If you decide to do nothing and your case involves a trust fund recovery penalty, or certain employment tax liabilities, the IRS will send you a bill for the penalty.
If you do not appeal a denial of an offer in compromise or a denial of a penalty abatement, the IRS will continue collection action. If you don’t agree, we urge you to appeal your case to the Appeals Office of IRS. The Office of Appeals can settle most differences without expensive and time-consuming court trials.
[Note: Appeals can not consider your reasons for not agreeing if they don’t come within the scope of the tax laws (for example, if you disagree solely on moral, religious, political, constitutional, conscientious, or similar grounds.)]”
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Golding & Golding Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Offshore Counsel
Generally, experienced attorneys in this field will have the following credentials/experience:
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
Interested in Learning More about Golding & Golding?
Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.