IRS Audit Defense

IRS Audit Defense

By Dave Horwedel, EA

Your worst fear has occurred. The IRS is auditing you. Whether it is a correspondence audit by mail, an audit down at your local IRS Office, or an IRS Field Audit in your home or business, it is stressful.

You can represent yourself in an IRS Audit, and you may even achieve a successful result. Then again, it is possible to walk away unscathed from pulling the trigger in a game of Russian Roulette.  Unless you are talking about a correspondence audit with minor money involved, it is probably unwise to represent yourself.

One could argue that if you are totally honest and have excellent records, and have done your taxes correctly, you have nothing to fear in an IRS audit.  And there is truth in that.

But what if you fibbed a little, or your records are spotty, or your return was not done perfectly?

Now we are getting to a more common situation. It does not mean you evaded taxes or paid less than you were required to. But perfection and taxes do not commonly appear together in front of an IRS Auditor.

So, what do you do if you are under an IRS Audit?

First, you sign an IRS Power of Attorney. Then you have your tax professional, such as an Enrolled Agent, lawyer, or CPA, review your tax records. Your tax professional will get full IRS transcripts. This gives the professional the data that the IRS has on you. If a debt is owed, a completed financial questionnaire is needed.  from you. This will allow the professional to propose solutions to tax debt that would work for you and meet IRS guidelines.

The tax pro can see any errors in your returns or records and correct them.  He then meets with the IRS or corresponds with them, and works out a solution.  It is usually wise for the taxpayer to keep his mouth shut and leave this to the pro.  The pro of course knows what the IRS is supposed to ask and how to respond to them.

Also, if the IRS asks a question that catches him by surprise, he can say “Wow! $30,000 were  deposited into the account by Jones Industries and not reported as income.  I have no idea what that is. I will have to check with my client.” And then come back the next day with the explanation that the $30,000 was a loan from Uncle Bob Jones’s company and not taxable income at all.

Do not get me wrong. We do not LIE to the IRS and we do not countenance our client’s lying to them. But in the heat of an IRS audit interview, it is easy to make a mistake and it can be disastrous. The Pro can come back the next day and put whatever the situation is, in the best possible light.

At my firm, we do a lot of audit defense for clients whose original tax preparer was not trained in IRS Representation.  Sometimes the tax return was simply done wrong.

We take the cards we are dealt and then make the best of the situation.

Just because the IRS says the return was wrong DOES NOT MEAN THE RETURN WAS DONE WRONG!  Even if there were errors on the return, this does not mean the  IRS correctly calculated the amount you owe.

One cannot count on the IRS to find every tax break you were entitled to!

Also, experience and training help enormously in getting penalties released.

Sometimes, one finds oneself dealing with an arbitrary or not fully competent auditor.

Knowing what recourse is available and what to say, and which recourse to use are critical here.  Asking to speak to their manager, going to appeals, or contacting the Taxpayer Advocate all have their place in dealing with the IRS.

Going to Tax Court or submitting  an Offer in Compromise are also tools that come in handy if needed.

If you are under tax audit, contact Guard Dog or Torchlight Tax for a free consultation.  Our team will review your situation and recommend the best possible handling.

This requires a higher level of skill than just doing a tax return. Many tax return errors go by unnoticed when filed and are handled by computer.  This does not occur in an actual audit. Rest assured there will be a live human reviewing  the cycle at some point.

Contact us for a free consultation at 1-877-758-7797. You can also review our websites at or or email us at

Best Business Structure For Taxes

Best Business Structure For Taxes

Hi, my name is Bruce Roth, and my guest today is Dave Horwedel. Dave is the founder of Torchlight Tax and Financial Services. He is also an enrolled agent and tax expert in Las Vegas, NV. What is the best business structure for taxes? What type of corporations and corporate entities there are? And why one might choose one over the over?

I want to mention that I’m talking about the tax implications of this, and I’m not practicing law. But, there are two actual types of corporations.

The Best Business Structure for Taxes

There is a C-Corporation which is the major corporation. The C-Corporation has stockholders and they make a lot of money. They usually have corporate meetings and boards of directors meetings. And it’s a big deal. They actually have to pay corporate income tax on the profits on the profits that the corporation makes.

And then as they pay their shareholders in dividends, the shareholders have to pay individual taxes on the dividends they receive. That’s the big corporations, called a C-Corporation.

The other type of corporation is called an S-Corporation. An S-Corporation is a small business corporation, it has limits on how much money it can make. It can’t have more than 100 shareholders. But the main thing about an S-Corporation is that the income it makes automatically flows through to its shareholders, so it never makes an income as a corporate entity. It all gets credited to the individuals who own it, so there’s no double taxation.

And this is a very, very common thing that a small businessman. A self-employed person, they can become an S-Corporation, and they can have tax benefits for them. And it also shields them legally.

Now, there is one other entity that’s not actually a corporation, but everybody thinks it is. It’s called a limited liability company, or LLC. Now, the funny thing about an LLC is that it can apply to internal revenue service to be treated tax wise as an S-Corporation, and in my cases this will give them a significant break as far as the self-employment tax, social security, Medicare. So, there’s actually only two types of corporation really, there’s the C, then I have the S. But there’s also the LLC, that kind of half rates as one, and it’s something that people should be aware of. And it can have definite tax implications for how you do it, and you could also do it to shield yourself from lawsuits and things like that.

Thank you so much. Thank you for watching.

What Is IRS Representation?

What Is IRS Representation?

Hi. I’m Bruce Roth and my guest today is Dave Horwedel. Dave is an Enrolled Agent and the founder of Torchlight Tax. Dave, what is IRS representation?

What Is IRS Representation?

It means that because you have this Enrolled Agent status you can have your client sign a Power of Attorney naming you as their agent, and they can state exactly what they want you to handle, but basically it goes to the point where you fully represent the person before the IRS and the IRS doesn’t even talk to the person because you’re their agent, you’re authorized to represent them because they signed the Power of Attorney.

Okay. When might a person need someone to represent them before the IRS?

Well, let’s say you get a letter back from the IRS, you did your tax return and then they say, “You owe us $50,000”, you might want to have somebody represent you before the IRS in that circumstance, or if they’re going to do an audit on you it would not be a bad idea to have an Enrolled Agent there because, see, the Enrolled Agent knows the tax law, he knows what the IRS is supposed to do, he knows it and the IRS guy who’s there knows it, so they’re not going to try to push you around. They’re not going to try to cut any corners because they’re going to have to be totally … they’ll have someone there who knows what’s going on, and usually at an audit you can definitely help your client.

Tax Audit Representation Cost

You also could use an Enrolled Agent to do offers and compromise where you settle with the IRS for less than the full payment, when you negotiate installment agreements There’s also a thing called uncollectable status which basically means you have a large debt with the Internal Revenue Service, or you have a debt but it can’t be large. But at the present time you’re not making enough money to pay off that debt and you don’t have any assets that they can seize. You don’t own property that they can just take and is worth a lot of money. So, the IRS rules that you’re uncollectable and they leave you alone. They stop trying to bother you about that unless your income goes up or something changes they’re not going to collect that money.

What is GuardDog Tax

What is GuardDog Tax

GuardDog Tax is a firm composed of EAS, CPAs, tax lawyers and support personnel that specializes in IRS Representation. We use cutting-edge tax representation software and our expert acumen to get the best attainable resolution of IRS tax problems