Comment on the reason for your vote, since higher dollar situations and complexity demand more sophisticated and expensive representation, vice an otherwise normal amount of paranoia for an honest working stiff just trying to stay out of tax trouble.

Question:
What type of IRS Audit representation would/do you trust?

Choices:
Tax Attorney
Enrolled Agent
CPA
Prepaid "Audit Defense" plans, aka TurboTax Audit Defense, etc.
Other, please explain

 

Never been audited before, so I can only say TT Audit Defense, because that’s what I paid for as part of my filing using TT.

I’ve been audited and that is when I told myself I would use a CPA from that time forward. The IRS are jerks, they demanded things of me that they were not supposed to (my new CPA told me when I hired her) and contradicted themselves in different communications.

They found nothing wrong, but I wil never deal with them again and will pay my CPA to go. If it were something where I think I may be in the wrong, I would pay for a tax attorney if the amount in question warranted it.

I have always used a CPA for both my companies and personal returns.

As it turned out I received some bad advise from him (he was a sole proprietor) and ended up getting audited with a resulting $297,000 fine!

To make a long story short I ended up hiring the best tax attorney I could find and had the fine reduced to $24,600. I ended up getting a bill from the CPA and told him to fuck off and I’ll gladly see his ass in court for misrepresenting the law.

I ended up hiring a CPA firm which is one of the largest in VA and specialized in business returns and even though I’m now retired and not living in VA I still use them.

My Tax guy, who is an EA.

As a CPA who has represented several clients never make any contact with an IRS auditor yourself. Choose a CPA or Enrolled Agent that has experience with many audits as many do not have the audit experience. The primary goal of IRS auditors is to "find" unreported taxable income and many use subtle questions that seem to be unrelated. Also I have experienced threats of using standard levels of certain everyday expenses. Only one time did I allow a client to accompany me to an audit. That was a disaster as she felt compelled to answer personal expense questions that I would have no knowledge of. I have never lost an audit. Tax attorneys only need to be hired when you have to go to Tax Court.

My tax prep group has audit protection, for a nominal fee.
We've used them for years, luckily haven't been audited.

Always funny when they call to set up the annual appointment:
"When do you want to come in?"
Uh, we live in Houston
"Online it is then"

They're based in Vegas.

While we're on this, what are the real audit red flags? I've always heard it's the home office deduction, but don't know many others. I've been self-employed for seven years and Mrs. Lee works from home four days per week. So our home office space is totally legit. But what else attracts IRS audits?

My tax return has gotten more simple over the years and we have used a CPA forever. I wouldn't expect an audit to amount to much , but I would let him handle things since he's the one that has prepared our return .

Glad to see the post by Anush, four above.

We’re fortunate to have many knowledgeable folks here.

This man

https://www.agoristtaxadvice.com/

I voted tax atty. We had a run in with the IRS during the lock downs, and I had a run in with my Favorite Aviation Administration many years ago. Neither time did they operate in accordance with their own rules or honestly. Both times I hired an attorney.

If it were a limited audit to one specific topic, a CPA might be my choice. If it were a broad general audit, I might well hire a team including both a CPA and an attorney.

An Enrolled Agent ("EA") is the most useful for ordinary taxpayers with complex, but otherwise manageable tax problems. They are certified by the IRS to represent you in tax matters, and are very well versed in the tax code, which is why I voted EA.

On the other hand, a tax attorney can be a useful beast if you have a problem that either turns on a matter of statutory or regulatory interpretation, or you have a highly technical, specific issue to solve. Most tax attorneys I know are specialists in a particular part of tax law; they are not generalists, and they are very expensive.

I know specialists in estate tax, international tax, aviation tax, asset protection (a subset of creditor law and tax), real estate tax, etc. I would not hire a tax attorney for an ordinary tax problem, I'd go EA. If I was going to lose my business, or faced hundreds of thousands of dollars in tax, for example, on an estate plan, I'd hire the right kind of tax attorney.

ETA: To supplement Anush's post above, many very talented tax accountants are not CPAs any longer. In most jurisdictions, you must work for a licensed CPA for between 1 and 2 years, doing audit, attestation, consulting, tax, etc., supervised and signed off by a licensed CPA in order to receive the designation after passing the CPA exam.

Good accountants who only want to do tax work, generally aren't willing to spend the time doing things they don't want to do, and, often, take the pay cut that comes with the "internship" period at a CPA firm.

The best tax accountant I know went to work directly out of college for his fathers tax firm, and immediately started earing 6 figures at a time when a CPA firm would have only paid him in the $60k range as a junior. Note that his dad didn't pay him a salary; he "ate what he killed" but there was enough tax work to make those numbers.

I say all that to say this; at this point in time, a CPA designation does not necessarily mean that the person who holds it is a specialist in federal income tax. Per Anush's point, you need to find someone with the right experience, not the right designation.

EA for me. My tax prep fee includes representation for any disputes or other IRS problems. $$$ well spent!

quote:

To supplement Anush's post above, many very talented tax accountants are not CPAs any longer

There is a problem with using someone that is not a CPA, EA or Attorney. No matter the expertise, they are not allowed to represent you or have access to iRS's records with a Form 2848 POA. An audit is not the same as a courtroom and you want someone that will stand up to overzealous audit requests. If your representative and the auditor do not agree the representative can immediately have the audit sent to a higher level. The first item an audit representative should do is ask you to sign a Form 2848 with their name and license number on the bottom. If they do not ask for a 2848 then find someone else.

^^^^ Oh, I absolutely agree. CPA, EA or Esq. are essential so that the professional is allowed to represent you before the IRS.

My comment was not designed to minimize the skill or talent of CPAs, but rather to point out that a lot of people who would make a good CPA have chosen to go the EA route instead, as it is a quicker path to the work they want to do.

I apologize if I was unclear on that point. One of the designations is absolutely needed for exactly the point that Anush makes, which is, the person with knowledge of the law, the tax code, and the pattern and practice of the IRS is not allowed to represent you unless they are properly licensed.

I voted CPA. I use a CPA and would expect their assistance in preparation for any audit.
Mine is new and I'm not sure if he's an enrolled agent but that would be even better.
My new one is part of a larger firm where I suspect there are enrolled agents available if warranted.

I will be sitting down with mine at the end of April to do future planning and to get better acquainted.

Never been audited. I use HR Block for personal taxes so any issues are automatically addressed.

For the question, if it is that high dollar and complex it seems like a tax attorney would be wise.

On any level, if you’ve tripped the wire to be audited, you want a tax attorney. That’s the only representation that will be protected by attorney client privilege. They are the only ones with standing to argue the law; the best the others can do is to argue you obeyed the law.

Think of it this way.

You have been invited to a fight. Declining is not allowed.

Would you like to show up bare handed, with a shield, or with a cannon?

The Tax Attorney is a cannon. The IRS rep considers themselves equally armed to an EA/CPA - AFAIK, the IRS tax attorneys have a higher status, and they are very conscious of rank.