Audit Assistance

Now for the ways I define the difference between Audit Assistance and Audit Representation.  Everyone of you is going to set “the line in the sand” at a different location for this call, so please understand these are not hard and fast “rules”, just what I have found works for me.

Audit Assistance include the items you do for you regular clients that get those pesky letters from the IRS of state that are really no big deal.  Things like:

1. Missing form from a mailed return
2. Missing signature from a mailed return
3. Two people claimed the same dependent, send proof of dependency
4. Prove your state withholding by sending the state a copy of the W2
5. The state is questioning the “Other State” credit because the efile system didn’t attach the other state return to the file
6. The IRS says the client missed a W2 and they did, IRS calculations are accurate on the CP2000
7. Send us paperwork proving your HH and EIC status

Of course, we all know that these are things that are usually simple, but can blow up into major cases.  Your first steps should be to get an engagement letter signed for the assistance you are providing (using the guidelines above).  Do you charge your regular clients for these services?  Completely your call, but make sure it’s delineated in the engagement letter.

Then determine what you need to do the assist the client.  It may be as simple as getting them to sign the form and put it back in the mail or helping them put together the items they are being asked for to verify their refund claims.

Or it may required some further digging that doesn’t rise to the level of representation.  Such as, needing to see a Wage and Income transcript to be sure the IRS has the right information.

You may be able to pull the transcripts with the IRS Online transcript service while the client is sitting right there.  While it doesn’t make up for the E Services that were discontinued last year, I love this service and have used it a lot.  Of course, if your client can’t provide the information to positively identify themselves online you may need to order transcripts to be mail either via the phone or online service.  Or you may need to complete a Form 8821 (Tax Information Authorization) or Form 4506T (Request for Transcript of Tax Return) and fax them in to the IRS.

You have probably seen a common denominator in all of these situations.  At the outset, none of them require the tax professional to actually “represent” the client or act as an intermediary between a tax authority and the client.

A lot of tax professionals I know consider this kind of assistance as part and parcel of their engagement to prepare the return in the first place,  that is fine, as long as that is spelled out in the original engagement letter.

But what about the client who walks in off the street or is referred to you by someone else.  You have never seen this person before, much less prepared any tax returns for them.  Do you jump in with both feet to full representation or wade in a little more tentatively?

I used to be a member of the jump in the deep end club, until I got bit by the gators at that end of the pool a time or two.  Now I’m a lot more cautious about jumping to full representation before having a good idea of the situation.

Next:  Part 3, Audit Representation