Professional Tax Relief and the IRS Audit

Title snippet: Your tax return runs the gauntlet of the IRS algorithm. Take really high deductions and the audit letter could be in the mail.

“A letter of reprimand is better than no mail at all.” -- old Navy saying

The foregoing wry saying might have been somewhat true before the days of e-mail and Skype. Substitute “an audit letter from the IRS,” into the concept, and “no mail at all” might be preferable.

Your first reaction before opening that official looking envelope with the IRS logo might be “Oh no!” After you open the letter, which turns out to be a notification that you’re being audited, you might exclaim, “Why me?”

Take a breath

At this point it would be wise to pause and get over the “Oh no!” part. It is what it is, and you’re definitely being audited. You should remember that embed in the IRS logo are the Scales of Justice, and you do have rights. But the upper part of the Logo is an eagle, which has the full force of an agency whose title -- Internal Revenue -- is to bring in revenue to that vast money spending behemoth, the United States Government.

High income = higher auditing rate

As to the “Why me?” part, it probably is of little comfort to you to know that less than one percent of taxpayers who earn less than $100,000 are ever audited. People in the big bucks category (one million dollars or more) according to one Forbes on line article are at least 12 times more likely to be audited.

IRS IT is old, but catches plenty

If you fall into the non-millionaire category, chances are that the IRS number crunching computers in Martinsburg, West Virginia, flagged your return as “hot.” SFGate columnist Douglas Greenburg, explains the process:

“All that number crunching results in something called a “DIF” score.  The DIF is something of an ‘Am I Hot or Not’ rating for your tax return.  Hot returns (high DIF scores) get reviewed for audit.  Cold ones (low DIF scores) continue to pass on through.”

Greenburg’s article points out that even though the IRS has improved its auditing technology, much of its IT support is underfunded and antiquated. Even though the IRS was a pioneer in data processing going back to the punch cards of the 1960s, according to a Federal News Radio piece, “the core of the IRS IT enterprise still relies on technology that's decades old.”

Dividing income into deductions is the hair trigger

According to the Greenburg article, Amir Aczel, a math professor reverse engineered the IRS computer system and came up with the following breathtakingly simple ratios of income divided by deductions claimed in Schedules A (itemized), C (Business) and F (Farm) of a tax return.

The IRS auditing computers simply look for high ratio percentages and, depending on the ratio, place your return into two zones, yellow and red. For example, if your itemized deductions on schedule A divided by your adjusted gross income is 35%, your return has a good likelihood of being audited. If the latter reaches 44%, your return is flagged and gets routed to an auditor.

Don’t procrastinate

There are other audit flags, and your letter of notification will tell you the specific reason(s) you were selected for this unwanted scrutiny. So your first step is to remain calm and responsive, and above all do not procrastinate. Procrastination will get you deeper into the powerful clutches of the world’s largest and most powerful collection agency.

You might need to “lawyer up”

Read more about the IRS auditing process online. Remember that you have the right to be treated courteously and professionally, or seek professional tax debt help. Among those rights is that you can hire a representative -- preferably a tax attorney -- whose qualifications and expertise will help you in dealing with an IRS auditor.

Let’s be honest here: IRS employees have an inherent conflict of interest. Their agency logo includes the Scales of Justice, but their job is to feed the Eagle holding those scales. If you’re looking a crippling tax bill, you really should consider hiring a qualified tax attorney, who knows everything about professional tax relief and who can also relieve the IRS auditor of the aforementioned conflict of interest.

Devin Finley is a freelance writer and tax relief expert. Devin writes on a multitude of financial and legal topics. He enjoys collaborating and strategizing with other professionals to ensure tax & debt clients receive competent and beneficial representation. For more information Visit http://optimataxrelief.com/