Your Rights in an IRS Audit
Facing an IRS audit can feel overwhelming, especially when it’s your personal or business’ financial future on the line. As a California resident, it’s important to understand you have rights that protect you throughout the IRS audit process. Knowing these rights can help you navigate the audit with confidence and minimize stress. Let’s look at your audit rights as a San Francisco business owner and taxpayer.
The Right to Be Informed — If you’re selected for an audit, the IRS must notify you in writing, explaining why the audit is happening and what documents you need to provide. As a California resident, you’re entitled to know exactly what the IRS is looking for, what rules apply, and the steps involved in resolving the audit.
The Right to Privacy and Confidentiality — California has strong privacy laws. As such, the IRS cannot examine any more of your personal or financial information than is necessary for the audit. The IRS is also required to keep any information you provide during the audit confidential and not share it with anyone without your permission, except in specific situations outlined by the law.
The Right to Representation — Whether you’re facing a full audit or just a minor inquiry, as a California resident, you are entitled to representation. You can have a tax professional, such as a tax attorney, represent you in discussions or proceedings with the IRS. This is particularly important in California, where audits may include not only federal tax issues but also state-level audits from the California Franchise Tax Board (FTB).
The Right to Challenge and Appeal IRS Decisions — If you disagree with the outcome of an audit, you have the right to challenge the IRS’ findings. After the audit, the IRS may propose changes to your tax return, but you do not have to accept them without question. You can request a conference with an IRS manager, file a written protest, or appeal to the IRS Independent Office of Appeals. Additionally, if the issue also involves California state taxes, you may appeal to the FTB as well.
The Right to a Fair and Just Tax System — The IRS is required to consider any extenuating circumstances that may impact your ability to pay or provide documentation during an audit. California residents may face high living costs or other financial hardships that should be taken into account. The IRS has discretion in handling these situations. Make sure your tax attorney or representative requests payment plans or other relief if needed.
The Right to Finality — The IRS cannot keep an audit open indefinitely. As a taxpayer, you have the right to know the final outcome of your audit within a reasonable time. The IRS must complete the audit within three years from the date you filed your return, unless there is evidence of fraud or significant underreporting of income. Once the audit is completed, you should receive a final determination, including any proposed changes to your tax liability. If no issues are found, you should receive a letter stating that your return was accepted as filed.
Being audited by the IRS can feel daunting. Yet as a California resident, you have specific rights that protect you throughout the process. Be sure to work with an experienced tax attorney or professional who can help you understand these rights and assure you and your San Francisco business are protected.
Allison Soares is a partner and tax attorney at Vanst Law LLP. It doesn’t matter the issue: audits, collections, appeals, international disclosures, grumpy people— Allison enjoys fixing problems. In addition to her legal work, she has worked in accounting and utilizes that knowledge to her advantage while handling cases involving EDD audits from San Francisco to San Diego.
