Utah Tax Attorneys Protecting Your Rights Throughout the Audit Process
Receiving an IRS or state audit notice can be one of the most stressful experiences you face as a taxpayer. The complex procedures, intimidating correspondence, and potential financial consequences leave many individuals and business owners feeling overwhelmed and uncertain about their next steps. Understanding how federal and state audits work is the first step toward protecting your rights and achieving the best possible outcome.
An audit is an IRS or state taxing authority examination of your tax returns—or failure to file returns—to verify the accuracy of income, deductions, and credits reported. While the government has the right to examine returns, you have equally important rights to professional representation and fair treatment throughout the process.
Michelle Turpin, P.C. represents individuals and businesses being audited by the IRS and state taxing authorities, offering strategic audit defense backed by over 100 years of cumulative tax law experience. Our seasoned Utah tax attorneys have navigated thousands of audits, from simple correspondence examinations to complex field audits involving multiple years and entities. We understand the stress an audit brings and are committed to protecting your interests at every stage. Learn more about our firm and our dedicated team of tax professionals.
The purpose of this comprehensive guide is to provide everything you need to know about the federal and state audit process and explain how Michelle Turpin, P.C. provides expert representation and defense to minimize your tax liability and protect your assets.
Understanding the Federal and State Audit Process
Why Are Taxpayers Audited?
The IRS and state taxing authorities select returns for audit through several methods, each designed to identify potential compliance issues:
Computer Selection and Scoring represents the most common audit trigger. The IRS uses sophisticated algorithms to score every return filed, comparing deductions, income, and other factors against statistical norms. Returns with scores exceeding certain thresholds receive further review.
Related Examinations occur when your return has connections to other audited taxpayers. If a customer, vendor, business partner, or financial institution undergoes an audit, the examining agents may identify transactions involving you, creating an audit lead. This "ripple effect" often catches taxpayers by surprise.
Specific Compliance Issues target particular areas of concern. The IRS maintains campaigns focusing on issues like cryptocurrency transactions, foreign accounts, conservation easements, and micro-captive insurance arrangements. Returns showing these items face increased scrutiny.
Information Matching identifies discrepancies between your return and information reported by third parties. When 1099s, W-2s, or other information returns do not match your reported amounts, automated systems flag the return for potential examination.
The Rise of Artificial Intelligence in Audit Selection
Both the IRS and states are now using Artificial Intelligence to flag individuals and businesses for audits. These AI systems analyze patterns far more complex than traditional methods, identifying anomalies that human reviewers might miss. For example, state taxing authorities compare businesses registered with the state against filed returns, automatically generating audit leads for non-filers or under-reporters.
Types of Audits: What to Expect
Understanding the type of audit you face helps determine the appropriate response strategy:
Correspondence Audits (Mail Audits) represent the simplest examination type. The IRS requests documentation for specific items through mail, typically focusing on one or two issues. Common topics include charitable contributions, medical expenses, or education credits. While less invasive than other audit types, these still require careful attention to avoid expanding the examination scope.
Office Audits require meeting with an IRS examiner at a local IRS office. These audits typically involve more complex issues than correspondence examinations and may cover multiple areas of your return. The examiner will request specific documentation in advance and conduct an in-person interview.
Field Audits bring the IRS directly to your home or business. These comprehensive examinations often span multiple years and involve detailed reviews of books, records, and financial systems. Field audits require the most extensive preparation and pose the greatest risk of significant adjustments.
Initial Contact and Response Requirements
The audit process begins with an official notice detailing the years under examination, issues being reviewed, and documentation requested. This initial contact sets important deadlines and establishes the examination scope. How you respond to this first notice can significantly impact the entire audit process.
Statute of Limitations Considerations
Understanding audit deadlines protects you from indefinite exposure:
Federal Limitations generally allow the IRS three years from the filing date to initiate an audit. However, this extends to six years for substantial understatements (exceeding 25% of gross income) and remains open indefinitely for fraud or unfiled returns.
State Limitations vary by jurisdiction, typically ranging from three to four years depending on the state and whether returns were filed. Many states mirror federal rules for substantial understatements, extending their review periods accordingly. If you're facing state tax problems, understanding these limitations becomes even more critical.
The Critical Importance of Professional Representation During an Audit
Why You Should Never Handle an IRS or State Tax Audit Alone
Attempting to navigate an audit without experienced representation exposes you to unnecessary risks and potentially costly mistakes. Tax authorities employ trained professionals who understand every nuance of tax law and audit procedures—you deserve equally sophisticated representation.
Protecting Your Rights requires understanding complex procedural rules and taxpayer protections. Our attorneys ensure that the examining agent follows proper procedures, respects your rights, and does not exceed their authority. This becomes especially critical when the government pursues both civil and criminal examinations, or when facing aggressive collection actions like tax liens or property seizures.
Managing Information Requests strategically can mean the difference between a minor adjustment and a major assessment. Providing too much information risks expanding the audit scope, while providing too little appears uncooperative. Our attorneys know exactly what to provide and how to present it effectively.
Preserving Legal Privileges protects sensitive communications and strategic discussions. When you work directly with the IRS, nothing you say is privileged. Attorney representation creates important protections for your communications and work product.
While most audits remain civil in nature, taxpayers should be aware that either the IRS or state taxing authorities may escalate an examination into a criminal investigation when they suspect intentional misconduct.
Examiners are trained to look for 'badges of fraud'—patterns such as maintaining double sets of books, destroying records, large unexplained bank deposits, false statements, or consistent underreporting of income. Even when these have innocent explanations, their presence can trigger referrals to criminal investigation units.
At the federal level, if an IRS examiner suspects fraud, they will generally suspend the civil audit and refer the case to the IRS Criminal Investigation Division (CID). At the state level, many jurisdictions maintain their own fraud divisions or collaborate with attorneys general or district attorneys to pursue criminal charges.
Sometimes taxpayers face parallel proceedings, where a civil audit runs alongside a criminal inquiry. Information provided in the civil setting may be shared with criminal investigators, heightening the risks of self-incrimination. Only attorneys can advise taxpayers on when and how to assert their Fifth Amendment rights without worsening their situation.
Consequences of criminal tax fraud extend beyond fines and prison time. Taxpayers may also face loss of professional licenses, reputational harm, immigration issues for non-citizens, and disqualification from government contracts.
For these reasons, engaging an experienced tax law firm early in the audit process is prudent. Attorneys can recognize warning signs of potential criminal exposure, protect privileged communications, and develop strategies that minimize the likelihood of a case escalating into a criminal matter.
Recognizing When an Audit May Become Criminal
Comprehensive Audit Defense Strategies for Individuals and Businesses
Strategic Preparation: The Foundation of Successful Defense
Document Organization and Review forms the cornerstone of effective audit defense. Our attorneys systematically review your returns and supporting documentation, identifying strengths to emphasize and weaknesses to address. We organize records according to IRS preferences, making examinations more efficient and less likely to expand.
Position Development involves crafting legal and factual arguments supporting your return positions. We research applicable law, regulations, and court cases to build persuasive arguments for disputed items. This proactive approach often prevents adjustments before they are proposed.
Risk Assessment helps you make informed decisions throughout the audit. We analyze potential outcomes, identify areas of exposure, and develop strategies to minimize overall liability. Understanding the stakes allows for strategic decision-making at each stage.
Communication Management: Controlling the Narrative
All Communication Flows Through Your Attorney once you retain representation. This buffer prevents misstatements, emotional responses, or inadvertent admissions that could harm your position. We handle all calls, correspondence, and meetings professionally and strategically.
Strategic Information Disclosure ensures the examiner receives necessary information without fishing expeditions. We respond to specific requests completely but do not volunteer information beyond the examination scope. This measured approach protects you from expanded inquiries.
Professional Relationship Management maintains a cooperative yet protective stance with examining agents. While we firmly defend your positions, we also understand that maintaining professional relationships often leads to better outcomes than adversarial approaches.
Addressing Common Audit Issues
Different audit issues require tailored defense strategies:
Business Expense Substantiation often triggers adjustments when documentation appears incomplete. We help reconstruct records, obtain third-party confirmations, and present expense legitimacy through alternative evidence when primary documentation is unavailable.
Income Reporting Discrepancies require careful analysis of information sources. We identify reporting errors by third parties, timing differences, and other explanations for apparent discrepancies. Our approach often transforms potential unreported income adjustments into simple reconciliation items.
International Transactions and Foreign Accounts face intense scrutiny. We navigate complex reporting requirements, treaty provisions, and disclosure rules to minimize exposure while ensuring compliance. Our expertise includes FBAR, FATCA, and transfer pricing issues.
Cryptocurrency Transactions represent an emerging audit focus area. We understand evolving IRS positions on digital assets and help document basis, holdings, and transactions in this rapidly developing area.
Charitable Contribution Valuations frequently generate disputes, especially for non-cash donations. We work with qualified appraisers, understand substantiation requirements, and effectively present valuation support to examining agents.
Responding to Audit Findings
When the examiner proposes adjustments, strategic response options include:
Agreement with Findings may be appropriate when adjustments are legally correct and fighting would prove costlier than acceptance. We help evaluate when agreement serves your best interests and negotiate payment terms if necessary. This might include establishing installment agreements or exploring offer in compromise options if you cannot pay in full.
Partial Agreement allows resolution of clear issues while preserving dispute rights for others. This strategic approach can narrow disputes, demonstrate reasonableness, and improve outcomes on contested items. We often combine this with business tax penalty abatement requests.
Complete Disagreement triggers formal appeal rights when examiner positions lack merit. We document disagreements thoroughly, preserving arguments for appeals or litigation while maintaining professional relationships. This often leads to audit appeals or business audit appeals.
In addition to traditional state audits, taxpayers should be aware of multi-state examinations conducted by the Multistate Tax Commission (MTC). The MTC coordinates joint audits across multiple states, particularly for corporate taxpayers operating in several jurisdictions. These audits can be especially complex because each participating state may apply different rules to the same set of facts, requiring sophisticated legal and strategic coordination.
Some states also outsource portions of their audit responsibilities to third-party contractors. These contractors are sometimes compensated based on the amount of revenue they assess, creating potential conflicts of interest and leading to more aggressive audit findings. Businesses and individuals facing contractor-driven audits should exercise particular caution and ensure they have experienced representation to challenge unsupported or inflated assessments.
Navigating these unique audit environments requires legal counsel familiar with multi-jurisdictional tax law and the ability to manage both state and federal considerations simultaneously.
Special Considerations in State and Multi-State Tax Audits
Specialized Audit Defense for Different Taxpayer Situations
Business Audit Defense: Protecting Your Enterprise
Business audits involve unique complexities requiring specialized expertise:
Employment Tax Classifications between employees and independent contractors generate significant exposure. We analyze worker relationships under current law, develop supportable positions, and negotiate reasonable resolutions when reclassification occurs. Our strategies often minimize penalties and limit assessment periods. Misclassification can lead to Trust Fund Recovery Penalty assessments against responsible persons.
Sales Tax Compliance creates multi-state complexity for many businesses. We understand nexus rules, exemption certificates, and audit sampling techniques. Our defense strategies often identify offsetting credits and limit sample period expansions. This is especially important for businesses needing comprehensive tax help.
Payroll Tax Deposits must meet strict timing requirements. When deposit penalties arise, we identify reasonable cause defenses and negotiate penalty abatement. For businesses with payroll tax debt, we coordinate audit defense with collection resolution strategies, helping avoid business bank levies and business tax liens.
Corporate Restructuring Transactions face scrutiny for business purpose and economic substance. We document legitimate business reasons, establish economic reality, and defend against recharacterization attempts. Our corporate restructuring expertise helps position these transactions favorably.
Individual Audit Defense: Protecting Personal Assets
Individual audits raise different concerns than business examinations:
Itemized Deduction Optimization requires balancing aggressive positions with sustainable documentation. We help reconstruct deductible expenses, identify often-overlooked deductions, and present persuasive support for claimed amounts. This expertise is particularly valuable when combined with proactive tax planning for individuals.
Investment and Passive Activity Issues involve complex basis calculations, at-risk limitations, and passive loss rules. Our expertise helps navigate these technical areas while maximizing allowable deductions. These issues often arise in conjunction with end of year tax planning strategies.
Schedule C Business Audits blur lines between personal and business items. We establish business purpose, document profit motive, and segregate personal elements to preserve legitimate deductions. Business owners facing these audits often benefit from our comprehensive audit help for businesses services.
Foreign Financial Asset Reporting carries severe penalties for non-compliance. We navigate voluntary disclosure options, reasonable cause defenses, and mitigation strategies when unreported accounts surface during audits. In some cases, innocent spouse relief may protect one spouse from liability for the other's reporting failures.
High-Net-Worth Individual Audit Defense
Wealthy taxpayers face specialized audit programs requiring sophisticated defense:
Multi-Entity Structure Examinations trace transactions across multiple returns and entities. We manage complex document requests, coordinate responses across entities, and present unified defense strategies.
Estate and Gift Tax Integration often accompanies income tax audits for wealthy individuals. We coordinate defense strategies across tax types, ensuring consistent positions and maximizing overall benefits.
Conservation Easement and Syndicated Investment Reviews target perceived abusive arrangements. We distinguish legitimate transactions from problematic ones, developing factual and legal support for allowable benefits.
Alternative Minimum Tax Planning under audit requires careful recalculation and position development. We identify preference items, calculate exposures, and develop strategies minimizing AMT impact.
How Michelle Turpin, P.C. Manages Your Audit Defense
Initial Assessment and Strategy Development
Immediate Evaluation begins when you contact us with an audit notice. We review the notice, assess the examination scope, and identify immediate response requirements. This rapid assessment allows strategic planning from the outset.
Power of Attorney Filing formally establishes our representation with the IRS and state authorities. Once filed, all communication flows through our office, providing immediate relief from direct contact with examining agents.
Strategic Planning Session brings our team together to develop your defense strategy. We analyze potential issues, assess documentation quality, and create a comprehensive plan for managing the examination efficiently.
Taking Control of the Audit Process
Document Collection Coordination systematically gathers necessary records while avoiding overwhelming data dumps. We request specific documents from you, organize them effectively, and present them strategically to examining agents.
Information Request Management filters examiner demands through legal analysis. We object to overly broad requests, negotiate reasonable limitations, and provide responsive documents without expanding examination scope.
Examination Scheduling balances examiner demands with your availability and preparation needs. We ensure adequate time for document gathering and preparation while avoiding unnecessary delays that might irritate examiners.
Active Defense Throughout the Examination
Meeting Preparation ensures you are never caught off-guard if your presence is required. We conduct preparation sessions, anticipate likely questions, and practice appropriate responses. Most importantly, we attend all meetings as your representative.
Real-Time Strategy Adjustment responds to examination developments. As issues emerge or examiner focus shifts, we adjust our approach to address new concerns while maintaining overall defense strategy.
Issue Resolution seeks agreement where appropriate while preserving dispute rights. We negotiate specific adjustments, trade favorable items against unfavorable ones, and narrow areas of disagreement for potential appeal.
Post-Examination Resolution
Report Analysis carefully reviews proposed adjustments for accuracy and legal support. We identify calculation errors, challenge unsupported positions, and develop response strategies for each proposed change.
Agreement or Protest Preparation depends on examination results. When agreement makes sense, we negotiate payment terms and penalty relief. When protest is warranted, we prepare comprehensive written protests preserving all arguments.
Appeals Coordination seamlessly transitions your case when examination results prove unacceptable. We prepare appeals documentation, develop refined arguments, and represent you through the IRS Appeals process.
Why Choose Michelle Turpin, P.C. for Your Audit Defense?
Unmatched Tax Law Experience
Over 100 Years of Cumulative Tax Law Experience means we have seen virtually every audit scenario. Our attorneys have exclusive tax law experience, unlike general practitioners who occasionally handle tax matters. This focused expertise translates to better outcomes for our clients.
Former IRS Chief Counsel Experience provides insider knowledge of government operations. Michelle Turpin's background developing IRS training materials and trying numerous cases offers unique insights into examiner mindset and strategy.
Former State Tax Attorney Experience brings similar advantages for state examinations. We understand how state auditors approach cases differently than IRS examiners and tailor our defense accordingly.
Deep Understanding of Audit Procedures
Extensive Trial Experience prepares us for worst-case scenarios while working to avoid them. Having tried numerous cases in Tax Court and other venues, we understand what arguments succeed and how to build winning records from the start.
Comprehensive Procedure Knowledge ensures we maximize every opportunity for favorable resolution. From fast-track settlements to alternative dispute resolution, we know all available options and when each serves our clients best.
Multi-Jurisdictional Capability addresses the reality of modern tax compliance. With attorneys admitted in multiple courts and experience with taxing authorities nationwide, we handle multi-state examinations seamlessly.
Strategic Audit Defense Philosophy
Proactive Issue Resolution prevents problems from snowballing. Rather than waiting for final reports, we address issues as they arise, often preventing proposed adjustments through early intervention.
Cost-Benefit Analysis guides our recommendations throughout the process. We help you evaluate when fighting makes economic sense versus when resolution better serves your interests.
Long-Term Perspective extends beyond current examinations. We consider future audit risk, ongoing compliance requirements, and overall tax planning when developing defense strategies. Our goal is not just to resolve the current audit but to position you favorably for the future.
Local Expertise with National Reach
Utah-Based Leadership provides accessibility and local knowledge. Our Salt Lake City office serves as headquarters for nationwide tax defense, combining local accessibility with national capabilities.
Virtual Service Delivery extends our expertise beyond Utah. Using secure technology, we effectively represent clients throughout the country without requiring extensive travel.
State-Specific Knowledge addresses varying state requirements. While maintaining our Utah base, we understand procedural differences across states and tailor our approach accordingly.
Client Success Story: From Audit Nightmare to Favorable Resolution
The following account represents a composite of successful audit defenses we have achieved, with identifying details modified to protect client confidentiality.
The Challenge: Sarah owned a successful consulting business that had grown rapidly over five years. When she received a field audit notice covering three years of returns, the IRS questioned nearly everything: her home office deduction, vehicle expenses, travel costs, and most concerningly, whether several workers should have been classified as employees rather than independent contractors.
The Complications: Initial document requests seemed overwhelming, asking for every receipt, bank statement, and contract for the examination period. The potential employment tax reclassification alone threatened six-figure assessments, not including penalties and interest. Sarah had maintained good records but worried about proving the legitimacy of every expense over three years.
Our Strategic Response: After filing our power of attorney, we immediately took control of communications with the examining agent. We organized Sarah's documents systematically, preparing summaries that highlighted the business purpose of questioned expenses. Most critically, we developed a comprehensive analysis of the worker classification issue, demonstrating through contracts, behavioral factors, and financial arrangements why independent contractor treatment was proper.
The Resolution Process: Throughout six months of examination, we managed information flow strategically. When the examiner initially proposed disallowing 40% of travel expenses, we provided detailed itineraries and business correspondence proving legitimate purposes. For the worker classification issue, we presented legal memoranda and comparable case law supporting our position.
The Outcome: Final adjustments totaled less than $15,000 across three years—a fraction of the potential exposure. The examiner accepted our worker classification position entirely, eliminating the largest threat. We also negotiated penalty abatement based on reasonable cause, further reducing Sarah's liability. Most importantly, we helped Sarah implement procedures to avoid future audit issues. For taxpayers facing similar challenges, understanding all available settlement options is crucial.
The Lesson: Professional representation transformed a potentially devastating audit into a manageable resolution. By controlling the process, presenting organized documentation, and making sophisticated legal arguments, we protected Sarah's business and personal assets while minimizing disruption to her operations.
Frequently Asked Questions About IRS and State Tax Audits
How long does a typical audit take?
Audit duration varies significantly based on complexity and type. Correspondence audits typically resolve within 3-6 months, while office audits average 6-12 months. Field audits, especially those covering multiple years or entities, can extend 12-18 months or longer. Having experienced representation often shortens the process by avoiding delays and efficiently addressing examiner concerns.
What documents will I need to provide?
Document requirements depend on examined issues. Common requests include receipts, bank statements, contracts, invoices, and accounting records. For business audits, employment records, vendor documentation, and financial statements are typically required. We help identify exactly what is needed, organize it effectively, and avoid over-producing documents that might expand the examination.
Can the IRS or state expand the audit to additional years?
Yes, examining agents can expand audits to additional years if they identify substantial issues. However, expansions require supervisory approval and must generally stay within statute of limitations periods. We work to prevent expansions by addressing issues promptly and avoiding red flags that might trigger broader examinations.
What happens if I disagree with audit results?
Disagreement with audit findings triggers formal appeal rights. You can request an appeals conference, where an independent officer reviews the case fresh. If appeals prove unsuccessful, Tax Court provides another venue for dispute resolution. We guide you through each option, helping evaluate costs versus benefits of continued dispute.
Can penalties be reduced or eliminated?
Many penalties can be abated through reasonable cause arguments. First-time penalty abatement, reasonable cause based on circumstances beyond your control, and statutory exceptions provide relief opportunities. We identify applicable penalty defenses and present them persuasively to maximize abatement chances. Understanding your potential settlement options can help you explore all available relief.
Should I handle an audit myself to save money?
While possible, self-representation rarely proves cost-effective. Professional representation typically saves more in reduced assessments than the representation cost. More importantly, experienced attorneys prevent mistakes that could trigger expanded examinations, criminal referrals, or collection problems. The peace of mind alone justifies professional representation for most taxpayers.
What if the audit reveals unfiled returns or unreported income?
Discovery of non-compliance during audits requires immediate strategic response. Depending on circumstances, voluntary disclosure, qualified amended returns, or other remediation strategies might apply. We help navigate these sensitive situations while minimizing civil penalties and avoiding criminal prosecution.
How does bankruptcy affect ongoing audits?
Bankruptcy filing creates an automatic stay that generally halts audit activity. However, the IRS can seek relief from stay to continue examinations, especially for trust fund taxes or fraud investigations. We coordinate audit defense with bankruptcy counsel when both issues arise simultaneously. Learn more about how bankruptcy intersects with tax matters.
Take Action: Protect Your Rights with Expert Audit Defense
Facing an IRS or state tax audit alone puts you at a significant disadvantage against trained government examiners who conduct audits daily. The decisions you make during an audit can impact your finances for years to come—do not leave them to chance.
Schedule your free consultation today to discuss your audit notice with experienced tax attorneys who understand exactly how to protect your interests. During this confidential consultation, we will review your notice, assess your situation, and explain how our proven audit defense strategies can minimize your tax liability and protect your assets.
Every communication with our attorneys is protected by attorney-client privilege, ensuring complete confidentiality as we develop your defense strategy. Unlike conversations with accountants or other tax professionals, your discussions with our attorneys receive the highest level of legal protection.
Our experienced team has successfully defended thousands of audits, from simple correspondence examinations to complex criminal investigations. We know how examining agents think, what they look for, and how to present your case in the most favorable light possible. See what our clients say about our services.
Contact Michelle Turpin, P.C. today at (801) 365-1030 or visit our contact page to schedule your free consultation. Do not let the IRS or state taxing authorities intimidate you—get experienced advocates on your side who will fight to protect your rights and achieve the best possible outcome for your situation.
Important Disclaimers
This content is provided for informational purposes only and does not constitute legal advice. Every tax situation is unique, and general information cannot substitute for personalized legal counsel. The information presented here should not be relied upon as a substitute for obtaining specific legal advice from a licensed attorney.
Results vary significantly by case. Past successes do not guarantee future outcomes. Each audit involves unique facts, circumstances, and legal issues that affect potential results. No attorney can guarantee specific outcomes in tax matters.
Consultation needed for specific guidance. Only through a confidential consultation can our attorneys provide advice tailored to your specific tax situation. We encourage you to schedule a consultation to discuss your circumstances and learn how we can help protect your interests during an audit.
Michelle Turpin P.C. assumes no liability for actions taken in reliance upon the information contained herein. Each person should consult their own tax attorney, business advisor, or tax advisor with respect to matters referenced in this content.
Further Reading: IRS Resources
For additional information about IRS audit procedures and taxpayer rights, we recommend reviewing these official IRS resources:
Understanding IRS Audits
Taxpayer Rights and Representation
Audit Response and Documentation
Appeals and Dispute Resolution
State Tax Resources
