MEDOWS CPA, PLLC can assist you with tax audit representation before federal, New York State and local authorities. We have successfully represented many clients before the IRS and other authorities. We know that a tax audit can be stressful and we do our best to minimize the burden on you and your family.

If you are being audited its best to contact us immediately, even before responding to the audit documents, if possible. Strategic decisions need to be made at the beginning of the audit process to minimize any negative impact.

Beware of New IRS Audit Initiatives

Our Manhattan tax audit CPAs are aware of significant changes in the way the IRS targets businesses for tax audits, and how it conducts them. When you read statistics about the percentage of returns that are audited, you might feel justified in playing the odds that your business won’t be among those selected by the IRS for scrutiny. However, the numbers are very misleading because the IRS is getting smarter about how it chooses tax returns for audits and how its examiners conduct their audits.

Over the past few years, the IRS has dramatically stepped up its efforts to study specific industries and to educate its examiners about business practices, terminology, accounting methods, and common industry practices. It has also identified areas of inquiry that produce audit results. Examiners are told specifically to look for certain red flags. The IRS is also updating its tax gap figures (the estimated $300 billion difference between what taxpayers owe and what they pay). Several research studies are also underway into various segments of the taxpayer population.

The result is that examinations are more sharply focused on areas that will potentially generate increased taxes, penalties and interest. Fortunately, there is a positive side to all of this. The IRS has made public a number of its Industry Specialization Program papers and Market Segment Specialization Program manuals. These help our tax experts keep up on the areas that the IRS will be targeting in its audits. So far, the IRS has issued detailed audit guide information on a range of industries such as retailing, professional services, restaurants, entertainment, communications and petroleum. Much more information on specific industries is expected to be issued as the IRS continues to devote resources to the development of these programs.

Another IRS initiative has the goal of improving compliance by meeting with representatives of various industries to work out understandings with them about specific tax problems. For example, the IRS and the food service industry have come to an understanding about properly determining and reporting employee tips. Employers that comply with the IRS mandates will face reduced IRS scrutiny on this issue.

A review of your business practices, with a view toward making some changes in light of the new IRS audit and compliance initiatives, may help keep your returns from being selected for examination, or help you survive if your tax return is audited. Contact our team of tax audit CPAs in Manhattan to help you with these matters.