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How to Minimize Your Risk When Facing an IRS Audit

January 17, 2025

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Internal Revenue Service (IRS) audits can present substantial risks, especially for high-income and high-net-worth taxpayers. Not only can revenue agents impose liability for back taxes, interest, and penalties, but if they uncover apparent evidence of an intentional unlawful tax avoidance scheme, they can engage Special Agents from IRS Criminal Investigation (IRS CI) to dig deeper. As a result, a strategic defense is critical, and this starts with engaging an experienced Texas IRS audit attorney to help minimize the risks involved.

Ideally, taxpayers will have the opportunity to prepare for an IRS audit in advance. High-income and high-net-worth taxpayers who rely on complex tax planning strategies can—and generally should—minimize their risk by taking a proactive approach to documenting federal tax law compliance. But, even when it is too late to plan ahead, there are still steps that taxpayers can—and generally should—take to protect themselves during the audit process.

5 Tips for Minimizing Risk During an IRS Audit

What can high-income and high-net-worth taxpayers do to protect themselves when facing scrutiny from the IRS? Here are five tips from Texas IRS audit attorney Lawrence Brown:

1. Conduct a Comprehensive Federal Tax Compliance Assessment

High-income and high-net-worth taxpayers who are facing IRS scrutiny should work with their tax counsel to conduct a comprehensive federal tax compliance assessment. The goal of this assessment should be to identify any compliance issues that have the potential to come up during the audit process.

Knowing what revenue agents are going to find (if anything) is a critical first step toward developing an effective audit defense strategy. If revenue agents’ concerns are misguided, using documentation gathered during the taxpayer’s assessment to affirmatively demonstrate compliance could help bring the audit to a swift resolution. On the same token, if the audit has the potential to lead to additional liability, addressing any issues head-on could help facilitate an efficient and favorable resolution while also demonstrating a good-faith commitment to compliance going forward.

2. Make Sure You Understand the Focus and Scope of the Audit

When facing an IRS audit, another key early step in the process is to discern the audit’s focus and scope. In many cases, these audits are triggered by specific concerns that fall within current IRS enforcement priorities. If revenue agents are focusing on a specific issue or a specific tax planning strategy in particular, having this information will allow for a much more efficient and targeted approach to implementing a defense.

With that said, IRS audits can (and often do) expand in scope after they begin. This is why conducting a comprehensive federal tax compliance assessment is essential. Even if an IRS audit is limited in scope initially, if other concerns exist, they cannot be ignored—and audit targets should work with their tax counsel to determine the best approach to addressing these concerns in light of the circumstances at hand.

3. Play an Active Role in the Audit Process (Including Intervening When Necessary)

Audit targets should rely on their tax counsel to play an active role in the audit process. This should include intervening in the process as necessary. If revenue agents attempt to overreach or exceed their authority, or if more time is needed to address a particular issue, intervening effectively could be essential for avoiding an unwarranted outcome and the need to file an appeal.

Generally speaking, audit targets must comply with revenue agents’ requests for records and information—and if they don’t, revenue agents may be able to compel compliance through formal legal means. However, there are limits to the lengths to which revenue agents can go during the audit process. Enforcing these limits can be essential as well, and this requires both: (i) a comprehensive understanding of the federal tax laws and audit regulations; and (ii) the ability to work with revenue agents effectively.

4. Consider Your Options for Mitigating Any Potential Liability

When facing high-risk audits, taxpayers should work with their counsel to consider their options for mitigating any potential liability. While IRS audits can lead to full liability for any back taxes, interest, and penalties owed, taxpayers can also use various strategies to minimize how much they owe the federal government.

For high-income and high-net-worth taxpayers who have made mistakes in the past, it will often (though not always) make sense to work with the IRS to seek a mutually agreeable resolution. With the right approach, high-income and high-net-worth taxpayers will be able to settle their federal tax debt in many cases. Here, too, working with an experienced Texas IRS audit attorney who understands how the agency operates and who can negotiate effectively on your behalf will be essential.

5. Target a Specific Outcome While Preserving Your Ability to Appeal

Regardless of the scope of the risk involved, when facing an IRS audit, it will typically make sense to target a specific outcome that is favorable under the circumstances at hand. For example, if your goal is to settle with the IRS, this should inform all aspects of your audit defense strategy. Or, if you do not believe that revenue agents will be able to gather the evidence they need to impose additional liability, then raising questions about the sufficiency of the evidence should be a central focus of your defense.

Finally, regardless of the specific outcome you are targeting, you will also want to take the necessary steps to preserve your ability to appeal. If the audit takes an unexpected turn, being prepared to file an appeal could become critical. This is yet another area where your tax counsel should be prepared to help, and your tax counsel should also be able to help you make an informed decision about if (and when) an appeal is warranted.

Request a Consultation with Texas IRS Audit Attorney Lawrence Brown

Texas IRS audit attorney Lawrence Brown represents high-income and high-net-worth U.S. taxpayers who are facing scrutiny from the IRS. If you would like to speak with Mr. Brown in confidence, please call 888-870-0025 or request a consultation online today.

Audits