© by Robert G. Nath, Esq.

1. How does the audit and appeal system work?
   
   It starts (generally) with the tax return you filed. If the IRS examines that return, it can propose more taxes and/or penalties. The process can be quick, such as by IRS notice of proposed amounts due (very common), or correspondence audit (less common), or office or field audit. If you agree, you sign papers and pay the additions. If you disagree, you have the right to “appeal” the agent’s proposed tax additions to the Office of Appeals. This is a separate sub-agency within the IRS that is tasked with settling cases based on “hazards of litigation,” that is, the chances the IRS might lose the case if it went to court.
   
   If you can’t agree with Appeals, you can go to court, usually the United States Tax Court. Audits can take anywhere from a few months to years. Appeals to the Office of Appeals can take the same range of time.
   
   Check out http://www.irs.gov/individuals/content/0,,id=98196,00.html for more information on the Office of Appeals.
   

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2. How did the IRS select my return for audit?
   
   Most returns are audited based on a scoring system whose acronym is DIF – Discriminant Information Function. That’s a fancy phrase for scoring your return based on “audit potential.” Other returns are selected based on related audits, math errors, and other reasons.
   

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3. Who has the burden of proof in an audit?
   
   You do, in the vast majority of cases. That’s the law; the IRS can ask for proof of your income or deductions, and absent your proof to the contrary, it can make reasonable proposals of additional income or disallow deductions, and you are stuck with the results.

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Robert G. Nath has focused on IRS matters for over 30 years. He holds degrees from Yale, the University of Pennsylvania, and Georgetown University. After clerking for a federal judge, Mr. Nath litigated tax cases for 8 years with the Tax Division, U.S. Department of Justice. Since 1984, he has been in private practice, representing individuals, entities, accountants and attorneys before the IRS and in court in tax collection, audit and tax litigation matters. Mr. Nath's book, "The Unofficial Guide to Dealing with the IRS" (Macmillan), was first published in 1997. He has been quoted in national media on tax procedure matters and has also appeared on radio and television programs. He has been an editor of professional journals and his articles have appeared in law reviews and other legal periodicals. Mr. Nath is a former U.S. Army Reserve Green Beret officer.
Note: Mr. Nath’s cases normally involved total tax liabilities of $100,000 or more.
Click here to contact Robert G. Nath.

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