October 19, 2007, Newsletter Issue #33: Audit Representation

Tip of the Week

DebtHelp.com Tip: Whenever you are involved in an audit, you have the option of representing yourself, have someone else accompany you, or have someone represent you in your absence.

Yourself. If you are confident in your tax knowledge abilities, and are involved with a basic return, this method may be your best choice. Be certain you are current with your IRS tax laws, though. Be prepared for any items the IRS may question you on. Be prepared, also, to explain your treatment of any item in question.

Accompany. IRS Form 8821 (Tax Information Authorization) names a representative for you. You are only authorizing this person, your representative, to receive information for you. He or she cannot fully represent you at the audit since they cannot take any action on the information they receive. You may still want to have this person along at an audit, though.

Actual representation. You will fill out and file IRS Form 2848 (Power of Attorney) when you want to have someone else fully represent you at the IRS audit examination. You do not have to be present. Here, you name your rep. The rep is fully authorized to represent you and take any action necessary. This includes signing an agreement for a deficiency or over assessment of tax to conclude the case. An example of individuals having the power of attorney includes CPAs, enrolled agents, and tax attorneys. These individuals must be allowed to practice before the IRS.

You may want to have actual representation when you are too emotionally involved in the audit to provide competent self-presentation, when you are uncertain as to handling other issues that may arise, the tax law is too complicated or you do not fully understand it, and highly technical supporting information may be required.

Also, the IRS will stop and reschedule an audit when you request a consultation with your representation (CPA, attorney, or Enrolled Agent).

By hiring actual representation during an IRS audit and giving someone the power of attorney, you can save yourself from a potential IRS problem. This is especially true if the applicable tax laws are beyond your comprehension level.

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