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Audit Process

Baltimore tax audit attorneys offering IRS audit assistance to residents of Maryland and the entire mid-Atlantic region

The prospect of a tax audit, whether state or federal, is something no taxpayer ever relishes. An additional layer of scrutiny of a tax year you believed to be well in the rear-view mirror can create tremendous anxiety in almost anyone. However, when an audit notice arrives, there is no need to panic. At Rosenberg Martin Greenberg, we make it our mission to help you sort through the confusion, respond effectively to all issues raised in the audit and minimize the disruption to your life and business.

The IRS Audit Process

At its essence, a federal tax audit or IRS audit is simply a detailed review of a prior income tax return to assess its honesty and accuracy. You should not automatically assume that the IRS intends to accuse you of nefarious activity. Ultimately, an audit is your chance to demonstrate the basis on which you filed your taxes for the year in question.

It is important to note that there are three main types of audits conducted by the IRS, ranging from relatively simple to potentially quite complex. The so-called "correspondence audit" is generally done entirely by mail, and may require you to submit requested supporting documentation, provide inadvertently omitted signatures or otherwise verify specific tax information. Once your submission is reviewed and accepted, the process will be complete.

Office audits are held at a designated IRS office and involve an interview of the taxpayer or his or her representative. The taxpayer's records and filings will be reviewed and discussed in an effort to resolve questions or concerns regarding their accuracy. The taxpayer will be informed as to which tax documents or other records will be required for the audit. Having an experienced tax audit attorney present at such an interview can play a significant role in achieving a more favorable outcome, and we at Rosenberg Martin Greenberg stand ready to provide the guidance and advocacy you need.

A field audit involves an interview and record review on-site at a taxpayer's place of business, home or accountant's office. Taxpayers have the right to make an audio recording of all interviews that occur, as long as notice is given to the IRS in advance. Given the higher level of intrusiveness and gravity of a field audit, securing the assistance of a Baltimore tax attorney with extensive contacts and experience interacting with tax agents and appeals personnel is critical.

Maryland Audit Process

The state tax audit process in Maryland is similar to that employed by the IRS. Representatives from the Comptroller's Office will contact taxpayers selected for review by phone or mail and inform them of their audit details. Business taxpayers will receive an initial contact from the auditor during which general information will be requested, and the auditor will state which documents will be necessary for the review.

An opening conference will be held, after which a review of the relevant records will be conducted. Once the auditor has completed the examination, a closing conference will be held and a full copy of the agency's working papers will be provided to the taxpayer. The taxpayer's signature acknowledging the closing meeting will then be required. Given the potential for the Comptroller to find that additional taxes are due and to assess penalties, it is essential for concerned taxpayers to align themselves with a Maryland tax attorney who has achieved positive resolutions for clients across the state. If you are facing a Maryland state tax audit, we at Rosenberg Martin Greenberg pledge to work collaboratively with you to assemble the most effective response possible and mitigate any negative impact.

Why Certain Returns are Chosen for an Audit

If you have been notified that a federal tax audit is imminent, you may be wondering how you were singled out for such an unfortunate distinction. The IRS uses several different methods for identifying returns they wish to audit, including:

  • Computer scoring: the agency utilizes computer programs that analyze returns and provide ratings for things such as the likelihood of unreported income and the likelihood that an audit would produce a different outcome than what the taxpayer reported.
  • Potential involvement in tax avoidance schemes: the agency often selects returns for audit based on investigations of tax avoidance transactions, "John Doe" summonses sent to businesses and credit card companies and information yielded from court orders.
  • Related reviews: The agency often selects returns that bear similarities to those submitted by other taxpayers who were also subjected to audit, including affiliated investors or business partners.
  • Information matching: Certain returns are chosen for audit when information reported by taxpayers does not match income reported on W-2 or 1099 forms.

Regardless of why your return was identified for audit, the attorneys at Rosenberg Martin Greenberg will help you through the entire IRS audit process, from initial receipt of the IRS audit letter through to the final determination and possible appeals.

Applicable Statutes of Limitation

Individual and business taxpayers often wonder how long they need to worry about being confronted with a tax audit. Broadly speaking, the IRS has three years following the filing of a return to initiate an audit. However, there are exceptions that may apply in certain situations, extending the statute of limitations period significantly.

Taxpayers who failed to report 25% or more of their income can be audited for six years following their filing, as can those who failed to report $5,000 or more of income from a foreign source. Those who simply do not file returns can be audited at anytime, regardless of how many years have elapsed.

Failing to include certain types of foreign assets on tax returns also subjects taxpayers to audit indefinitely. It should also be noted that no statute of limitations applies in cases of suspected fraud. The IRS can pursue such cases at any time.

It is common for the IRS to contact taxpayers identified for audit and request them to agree to an extension of the time period within which the investigation can commence. While taxpayers have the right to decline the request, it is generally advisable to agree to the extension and seek seasoned tax counsel who can help assess the situation and work toward resolution.

Possible Tax Audit Outcomes

The duration of tax audits can vary considerably, depending on the complexity of the issues under examination, the level of cooperation secured and the quality of the documentation offered in support of the taxpayer's position. Audits can conclude in one of three ways:

  • No change: in such cases, the taxpayer provided sufficient support for the return filed, and no changes are found to be warranted
  • Agreed: cases in which the IRS proposes changes to the return and the taxpayer accepts the changes and is willing to make the necessary adjustments
  • Disagreed: in such cases, the IRS proposes changes, but the taxpayer does not agree to them

Taxpayers who agree with audit findings must sign a declaration to that effect. If additional money is owed (including possible fees and penalties), payment or payment arrangements must be made promptly. Taxpayers who disagree with audit findings may request further review by a manager or initiate a mediation or appeals process. In such circumstances, there is no substitute for the expertise of a tax audit attorney who can evaluate any contentious issues that remain and seek a mutually agreeable resolution.

Baltimore Tax Audit Attorneys Who Can Help

Few things cause more aggravation, inconvenience and concern than the IRS audit process. The potential for costly fines or increases in tax liability you believed to have been long settled can be a real source of stress and sleepless nights. Fortunately, you need not go it alone.

At Rosenberg Martin Greenberg, we stand prepared to put our years of tax audit experience to work for you. Providing unrivaled personal service and knowledgeable representation for individual and business clients alike, we are eager to help you achieve positive resolution of your tax concerns. To schedule a consultation, contact Brian Crepeau at 410.649.4981 or email

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If you are seeking counsel for a tax related legal matter, contact the Rosenberg Martin Greenberg Tax Controversy experts.

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