IRS audits
IRS Audit Representation by a Tax Attorney and CPA
An audit letter is a request for proof, with a deadline attached. How you answer it decides whether the audit ends in a no-change letter or a bill.
Firm particulars
- Attorney
- Hani H. Khatib, Attorney at Law · CPA · LL.M. (Taxation)
- Office
- 6600 W College Dr, Ste 207, Palos Heights, IL 60463
- Hours
- Monday to Friday, 9:00 a.m. to 5:00 p.m.
- Telephone
- (708) 722-2222
- info@khatiblaw.com
- Accreditation
- BBB Accredited since April 2022 · A+
Start here
Is this you?
An IRS audit attorney does something simple: makes sure the IRS sees exactly the evidence it needs for the items it asked about, nothing less and nothing more. Most audits go badly because the taxpayer answered questions that were not asked, produced records that raised new issues, or missed a date. Khatib Law LLC handles IRS examinations and appeals from Palos Heights for individuals and small businesses across Chicago, Cook County and the southwest suburbs, and Illinois Department of Revenue audits on the same footing, as part of its tax practice.
The person doing the work is Hani H. Khatib, Attorney at Law · CPA · LL.M. (Taxation). He reviews the return as the auditor will, and he can address both the accounting and the law behind each adjustment.
A letter says your return for a given year has been selected for examination and lists the items to document.
A CP2000 notice says the IRS received income information that does not match your return.
The auditor has asked for bank statements for accounts you did not think were part of the audit.
Your business received a field-audit appointment and the revenue agent wants to tour the premises.
The audit is over, the report proposes tax and penalties, and the 30-day letter is on your desk.
The letter tells you which one you have, and the right response differs.
Correspondence audits are conducted entirely by mail and typically cover one or two items: a charitable deduction, education credit, dependent, or Schedule C expense category. The IRS asks for documents by a stated date. Send organized copies with a cover letter that ties each document to the item questioned, and the audit usually closes.
Office audits ask you to bring records to an IRS office for an interview. They cover more items than a correspondence audit and the interview is where scope expands. A representative holding Form 2848 attends in your place.
Field audits are conducted by a revenue agent at your place of business or your representative's office, cover the entire return, and are the norm for businesses with significant gross receipts. The agent will ask to see how the books are kept, who signs checks, and how cash is handled. Field audits run for months and are the ones where the choice of representative matters most.
Process
What to do when the letter arrives
Note the date
Day one · five minutes · the response date is printed on the letter
Every audit letter has a response date, usually about 30 days out. Missing it does not end the audit; it lets the auditor decide the items without your evidence.
Do not call to explain
From day one · until the file has been reviewed
The first conversation with an auditor sets the record; it should happen after the return and the records have been read, and through your representative.
Sign Form 2848
Week one · about 15 minutes · signed at the consultation
Once filed, the auditor is required to deal with the representative. The firm then pulls your transcripts and reviews the return for every issue, including the ones the IRS has not raised yet.
Assemble the evidence for the items listed
Weeks one to three · your records against our checklist
Receipts, bank records, mileage logs, invoices, closing statements, basis records. Where a document is missing, there are accepted ways to reconstruct it, but that is a decision to make deliberately.
Respond, and manage the scope
By the response date · extensions are usually granted when asked for in time
The response answers what was asked. Requests to expand the audit, extend the statute of limitations, or interview you personally are each answered on their merits.
Taxpayers assume the audit interview is a chance to make a good impression. It is an evidence-gathering session. The standard questions (describe your business, who keeps the books, do you have other bank accounts, did you receive cash) are designed to surface income and issues beyond the letter. A truthful but unprepared answer can open a new year, a new schedule or a referral.
You have the right to representation and, unless the IRS issues a summons, the right not to attend when a representative is present. Using both is how the system is designed to work: the auditor gets complete, organized answers to every legitimate request, and you get a buffer between your nerves and the record.
The most common IRS letter is the CP2000. It proposes additional tax because a third party reported income (a 1099-NEC, a 1099-B, a 1099-R, a W-2) that the IRS cannot find on your return. Respond by the date printed on it. If the IRS is right, you agree and arrange payment; if it is wrong, you say so with documents.
CP2000 notices are frequently wrong in predictable ways: brokerage sales reported at gross proceeds with no basis, retirement rollovers treated as distributions, income reported twice, or a spouse's 1099 reported under the wrong return. A one-page response with the right schedule can reduce the proposed tax, sometimes to zero. If you do not respond, the next letter is a CP3219A statutory notice of deficiency, and the 90-day Tax Court petition period starts running from its date.
The IRS generally must assess additional tax within three years after a return is filed (26 U.S.C. 6501(a)). That extends to six years when more than 25 percent of gross income is omitted, and there is no deadline for a false or fraudulent return or for a year in which no return was filed.
Two practical consequences. An auditor nearing the three-year mark will ask you to sign Form 872 extending the statute; whether to sign, for how long and for which issues is a negotiation. And unfiled years have no statute at all, which is why the firm's unfiled tax returns work often begins during an audit.
An audit ends in one of three ways: no change, agreed, or disagreed. If you disagree with the examination report, you can first ask for a conference with the auditor's manager. Beyond that, the 30-day letter attached to the report gives you the right to review by the IRS Independent Office of Appeals, a separate function whose officers weigh the hazards of litigation rather than defend the auditor's work. The request is a small case request on Form 12203 when the proposed additional tax and penalty are $25,000 or less per tax period, and a formal written protest above that.
If you do not appeal, or Appeals cannot resolve it, the IRS issues a statutory notice of deficiency. You then have 90 days from its date (150 days if addressed outside the United States) to file a petition with the U.S. Tax Court, which cannot hear a late petition.
A petition is the one way to contest the tax before paying it, and many petitioned cases settle with Appeals before trial. The firm prepares the protest and represents you in the appeals process; if a matter is heading toward trial, you will be told what that involves and what it would cost before any decision is made.
After assessment, an audit reconsideration can reopen a case when you have records the examiner never evaluated. Collection alternatives are explained on the tax debt relief page.
A small number of examinations are referred to IRS Criminal Investigation, usually for unreported income from an identifiable source, falsified records or repeated non-filing. The warning signs are an auditor who suddenly stops communicating, or questions about intent rather than numbers. The firm's work in a civil audit is designed so that a referral does not happen because of how the audit was handled. If one is threatened you will be told immediately and advised on engaging criminal tax defense counsel; the firm does not offer criminal tax defense as a service.
The Illinois Department of Revenue audits income, sales and use, and withholding tax under its own procedure, with a 60-day protest deadline rather than the IRS's 90, and a federal audit adjustment must be reported to Illinois within 120 days. The procedure is on the Illinois Department of Revenue page, and the background on the Department's audit powers is in our article on the Illinois Department of Revenue's audit authority.
The difference
IRS audit representation by an attorney who is also a CPA
The auditor's analysis is accounting; the appeal is law
The same person reconstructs the Schedule C from bank records and then writes the protest explaining why the reconstruction is correct under the Code and the cases.
Privilege when the facts are difficult
Advice from a lawyer is protected by the attorney-client privilege; the federal practitioner privilege for CPAs (26 U.S.C. 7525) does not apply in criminal matters. The privilege covers legal advice, not the preparation of a return. When an audit has a sensitive history, the analysis belongs inside a law-firm engagement from the first day.
Penalties are argued, not accepted
The 20 percent accuracy-related penalty is routinely proposed and can be removed where reasonable cause and good faith are shown; it is argued, not accepted. Business audits raise the same issues at the entity level; see business tax attorney.
At the first meeting, attorney Hani Khatib reads the letter and the return and tells you which items are at risk and what the probable adjustment is. Once Form 2848 is filed, you hear from the firm after every contact with the IRS, and no document goes to the auditor without your review.
Request a consultation
Talk it through with the attorney.
Tell us what you are facing in a sentence or two. We will tell you what the first meeting involves, and whether there is a charge for it, before you commit to anything.
Related
Related services
Tax debt relief
Can tax debt be settled for less than I owe?
You owe more than you can pay, and the letters are getting more serious. There are six ways an IRS balance ends, and each has rules, forms and a deadline.
Payment plans, offers, liens and leviesIllinois Department of Revenue
What happens if I owe the Illinois Department of Revenue?
The Illinois Department of Revenue has its own audit bureau, its own notices, its own 60-day protest clock and its own tribunal. None of it works like the IRS.
Audits, protests and the Tax TribunalBusiness tax
What happens if my business falls behind on payroll taxes?
A business tax problem is rarely only the business's problem. Unpaid payroll taxes become personal liability, a sales tax audit threatens the certificate that lets you sell, and the entity choice you made years ago sets the bill every April.
Payroll, sales tax and the S election
Questions
Questions we are asked
What should I do when I receive an IRS audit letter?
Read the letter for three things: the tax year, the items being examined, and the response date. Do not call the number on the letter to 'explain'; anything you say is part of the record. Gather the documents for the listed items only. Then decide who will respond. If you hire the firm, you sign Form 2848 and from that point the auditor deals with Hani Khatib, not you.
What triggers an IRS audit?
The IRS says it selects returns by random selection and computer screening against statistical norms (a return whose deductions, losses or credits sit far from others with similar income), and by related examinations, where a business partner, employer or other taxpayer is already under audit. Third-party reporting mismatches produce CP2000 notices rather than audits. In practice the recurring triggers are large Schedule C losses, cash-heavy businesses, unreported 1099 income, rental losses claimed against wages, and round-number deductions with no records.
What are the three types of IRS audits?
A correspondence audit is conducted by mail and usually covers one or two items; it is the most common. An office audit asks you (or your representative) to bring records to an IRS office. A field audit sends a revenue agent to your business or your representative's office and covers the whole return; it is used for businesses and complex individual returns. The letter tells you which one you have.
How far back can the IRS audit?
The IRS generally has three years from the date a return was filed to assess additional tax (26 U.S.C. 6501(a)), so most audits cover the last three years. If more than 25 percent of gross income was omitted the period is six years, and there is no limit for a fraudulent return or when no return was filed. The IRS says it usually does not go back more than six years. An auditor who asks you to extend the statute (Form 872) is asking for a concession, and it deserves a conversation before you sign.
Should I talk to the IRS auditor myself?
You have the right to be represented, and most taxpayers are better off using it. An auditor's job is to find adjustments, and the interview questions (how do you track cash, who else uses the business account, where did the deposits come from) are designed to open issues beyond the letter. A representative answers the questions that were asked, supplies the documents that were requested, and keeps the audit inside its scope. You cannot be required to attend the interview, absent an administrative summons, if a representative holds your Form 2848 (26 U.S.C. 7521(c)).
Is a CP2000 notice an audit?
No. The IRS itself says so. A CP2000 is a proposed change because income or payment information reported by a third party (a 1099, a W-2, a 1098) does not match your return. You respond by the date on the notice, either agreeing or disagreeing with documents. If you do nothing the IRS issues a statutory notice of deficiency (CP3219A), and from that date you have 90 days to petition the U.S. Tax Court before the tax is assessed. Many CP2000 notices are wrong, because the IRS matched gross proceeds without the basis, or counted income already reported on another line.
Can I appeal the audit result?
Yes. If you disagree with the examination report, the 30-day letter that accompanies it lets you request a review by the IRS Independent Office of Appeals: a small case request on Form 12203 if the proposed tax and penalty are $25,000 or less for each period, otherwise a formal written protest. If no appeal is filed, or Appeals does not resolve it, the IRS issues a notice of deficiency and you have 90 days to petition the Tax Court. Even after assessment, an audit reconsideration can reopen the case if you have records the auditor never saw.
Your attorney
Hani H. Khatib
Attorney at Law · CPA · LL.M. (Taxation)
Founder and managing attorney of Khatib Law LLC, established in Palos Heights in 2017. An attorney licensed in Illinois and a Certified Public Accountant, he concentrates his practice in estate planning, real estate, tax controversy and small-business matters. About Hani Khatib
Request a consultation
Tell us what you are facing.
A sentence or two is enough to start. We will tell you what the first meeting involves, and whether there is a charge for it, before you commit to anything.
(708) 722-2222
Monday to Friday, 9:00 a.m. to 5:00 p.m. · 6600 W College Dr, Ste 207, Palos Heights
What happens next
Your message goes to the firm’s office, not a call centre.
If you mention a deadline, it is read first.
We run a conflicts check and, if we can help, call or email you to set a time.
We confirm the kind of matter and what the first meeting involves, including whether there is a charge for it.
If we go forward, you receive a written engagement letter.
Scope and fee basis in writing before any work begins. Please do not email documents until we have confirmed an engagement in writing.
What to bring to the first meeting
- The audit letter and everything that came with it, including the list of items the IRS wants documented and the response date.
- The return under examination, and the returns for the year before and the year after.
- Whatever records you have for the items listed: receipts, bank statements, invoices, mileage logs, closing statements.
- Anything you have already sent to or received from the auditor, including any Form 872 request to extend the statute.