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What Should I Do if I’m Being Audited by the IRS or ADOR?

Arizona tax audit attorney explains how system works, step by step

Arizona tax lawyerBeing audited by the Internal Revenue Service (IRS) or Arizona Department of Revenue (ADOR) can be an intimidating and daunting task. And depending on their findings in your tax audit, you could be fined or even criminally charged with tax evasion or other serious allegations.

That's why it's critical that you contact an Arizona tax audit attorney at Brown & Jensen to discuss the details of your case. We have extensive experience representing people and businesses being audited in Arizona and can walk you through this complex process, step by step.

That's also why we created this guide for what to do if you're being audited in Arizona. We realize you probably have a lot of important questions. And we want to help put your mind at ease and assist you in any way possible with your audit.

What you should know

The IRS and ADOR audit people for many different reasons. Some of the most common reasons an audit may be triggered include:

  • Clarification of tax filings
  • Non-payment of taxes
  • Mathematical errors
  • Dispute over tax deductions
  • Dispute over residency

In general, the IRS and ADOR conduct two types of audits. One type is done in the form of a letter, in which the person or business being audited simply needs to respond in writing. This type of audit is known as a "correspondence audit." The other type of audit is a "field audit." That's when an auditor visits you personally and examines your bank statements, business records and personal records.

What you should do

We strongly recommend taking the following steps if you or your business are the subject of an audit by the IRS or ADOR in Arizona:

Say or write nothing - If the IRS or ADOR contacts you to inform you that you are the subject of a tax audit, do not immediately respond in writing or verbally to their notification. Please note that the IRS and ADOR only notify people of an audit in writing. If you receive a phone call informing you that you are being audited, report the phone call immediately to local police and the IRS or ADOR. It is most likely a scam.

Contact our law firm - Once you receive a notification letter informing you that you are being audited by the IRS or ADOR, contact our law firm and schedule an appointment with an experienced tax attorney. We can review your notification letter with you and explain all your available legal options.

Respond to audit notice - You have 30 days in most cases to respond to an audit notification letter from the IRS or ADOR. We can work with you to decide what's the best way to respond in your particular case. Our suggestions might include:

  • Denying tax discrepancy.
  • Creating payment plan to resolve tax dispute.
  • Offering to settle tax debt in one, single payment.

Their response - After we help you respond to their audit notification letter, you will likely receive one of the following responses:

  • From the IRS
    • No change - Audit confirmed your original tax filing was correct. No further action is required.
    • Agreed - IRS audit confirmed your proposed changes as outlined in your response to its audit and agrees with them.
    • Disagreed - IRS disagrees with your proposed changes as outlined in your response to an IRS audit.
  • From the ADOR
    • No adjust/thank you letter - No adjustment (changes) necessary, meaning your initial tax forms were correct and the ADOR does not need any additional information.
    • Notice of Proposed Determination - You are eligible for a tax refund or credit.
    • Notice of Proposed Assessment - You allegedly owe additional taxes.

Our response - If you receive a "Disagree" letter from the IRS or a "Notice of Proposed Assessment" from the ADOR, you have 90 days in most cases to respond to such notices. We can work with you to decide what's the best response to such a notice. In general, you often have two options:

  • Pay additional assessment plus interest and any penalties.
  • Appeal your case. You often have a choice of an information conference or formal hearing.

Most tax appeal requests are handled by the United States Tax Court, United States Court of Federal Claims or the United States District Court in cases involving the IRS. In cases involving the ADOR, you will likely be able to request an appeal in the Arizona Tax Court, the Arizona Board of Equalization or the Office of Administrative Hearings. Whatever the circumstances in your case, we can help you every step of the way. We're here for you when you need us most.

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