Handling your own tax audit or dispute can be risky due to the potential for miscommunication and mistakes when dealing directly with the IRS or state tax agency. This is why some people, including criminal defense lawyers, prefer to add distance between themselves and the government when discussing tax matters. While the likelihood of a tax case turning criminal is low, the reluctance to communicate directly with the IRS still exists for many individuals.
Lawyers may also feel uneasy when dealing with tax audits, despite being familiar with advocacy and documentation. The thought of being audited by a powerful agency like the IRS can be daunting for anyone, including lawyers. Audits can vary in severity, starting with a simple letter requesting clarification on certain aspects of a tax return. While some people may choose to handle audits themselves, it is advisable to proceed with caution, especially in more serious cases.
Many experts recommend having an accountant or tax lawyer handle audits or tax controversies instead of attempting to navigate them alone. Professional representation often leads to better outcomes for taxpayers, even when factoring in the cost of professional fees. While there are cases where self-representation may be suitable, they are rare, and seeking professional assistance is generally more beneficial.
Taxpayers are encouraged to seek representation early on in the process, as attempting to handle a case independently can sometimes lead to more significant issues that require professional intervention. Tax Court cases handled by individuals without professional assistance often experience difficulties, as seen in cases such as Bailey v. Commissioner, T.C. Memo. 2012-96. Despite achieving some success in the case, the taxpayer faced substantial penalties and lost on several other issues.
Handling tax cases without professional assistance can result in costly mistakes, as demonstrated in cases where fundamental accounting errors were overlooked and ultimately led to unfavorable outcomes for the taxpayers involved. Hiring a tax lawyer or CPA early on can help to identify and address potential issues more effectively, preventing unnecessary complications and penalties. Having an objective and unbiased perspective on one’s financial records and documents is essential when navigating tax disputes.
In conclusion, seeking professional representation when facing a tax audit or dispute is often the best course of action to ensure a favorable outcome. While there may be instances where self-representation is feasible, the risks involved in handling tax cases independently can outweigh any perceived benefits. Learning from past cases where taxpayers faced difficulties without professional assistance highlights the importance of seeking expert advice and guidance when dealing with tax matters.
