An IRS audit letter starts a process with fixed stages and deadlines. A tax attorney serving Livermore can respond to the examiner, organize the records that support your return, challenge an adjustment through IRS Appeals or the U.S. Tax Court, and deal with collection if a balance results. Here is how that path unfolds, stage by stage.
Stage one: read the audit letter closely
Not every IRS letter is an audit, and not every audit looks the same. The letter itself usually tells you which kind you are facing.
Correspondence audits
The IRS asks by mail for documents supporting specific items, such as a deduction, a credit or a line of income. These are narrow, but an unanswered letter can turn into an assessment on the IRS's own figures.
Office audits
You are asked to bring records to an IRS office. The letter normally lists the items under review, and the questions can go beyond the paperwork.
Field audits
A revenue agent reviews records at your home, business or representative's office. Field exams are common for businesses and tend to cover more ground, including how income is recorded.
A document-matching notice such as a CP2000 is technically not an audit, but it follows similar logic: the IRS proposes a change and waits for your response. If you have just opened one of these letters, call (415) 754-0115 to schedule a free consultation, or use our contact page before the response date passes.
Stage two: the examination itself
During the exam, the goal is to answer the questions actually asked with organized, accurate records, nothing more and nothing less. Representation can help here in practical ways:
- With a power of attorney on file, the attorney can attend in your place, so you are not answering open-ended questions on the spot.
- Records are reviewed before they go to the IRS, so gaps can be explained or reconstructed rather than discovered by the examiner.
- Requests that drift beyond the scope of the original letter can be identified and discussed.
When the exam ends, the examiner issues a report. If you agree, you sign and the tax is assessed. If you do not agree, the report usually arrives with a 30-day letter explaining how to request an appeal.
Stage three: how a tax attorney in Livermore handles the appeal
Disagreeing with an examiner is common, and the system provides two main routes to challenge the result. Our article on the IRS audit appeals process covers them in detail.
IRS Independent Office of Appeals
A timely protest in response to the 30-day letter moves the case to Appeals, which is separate from the examination function. Appeals officers consider the hazards of litigation, meaning how each side's position might fare in court, which gives both sides room to resolve a dispute without going to court.
The U.S. Tax Court
If no agreement is reached, or if you skip Appeals, the IRS issues a Notice of Deficiency, often called the 90-day letter. A petition filed with the Tax Court within that period lets you contest the deficiency without paying it first.
Why the 90-day letter deserves special care
The deadline is printed on the notice and should be treated as firm. If it passes without a petition, the IRS can assess the tax, and challenging it afterward is generally harder and may require paying first and seeking a refund.
Pressure points for Livermore businesses
Livermore has a mix of wineries, contractors, independent consultants and family-run shops, and audits of small businesses tend to focus on a few recurring issues:
- Schedule C income and expenses. Examiners compare deposits with reported income and look for support for vehicle, meal and home-office deductions. See our guide on an IRS audit when you are self-employed.
- Worker classification. Treating workers as independent contractors rather than employees can trigger employment tax questions.
- Payroll taxes. When withheld employee taxes are not paid over, the IRS can assess the Trust Fund Recovery Penalty personally against responsible owners and officers.
When audit results turn into a tax debt
An assessment that cannot be paid in full moves the file from examination to collection. Balance-due notices follow, then a notice of intent to levy, then a final notice that opens a 30-day window to request a Collection Due Process hearing. At that point the conversation shifts from whether the tax is correct to how it will be resolved: a payment plan, Currently Not Collectible status, an offer in compromise or, for some older income taxes, bankruptcy.
California adds a second layer. When the IRS changes your federal return, you are generally required to report the change to the Franchise Tax Board, and the FTB may issue its own proposed assessment based on the federal result. Planning for both is part of resolving an audit properly.
The Somal Law Firm represents individuals and small businesses in the Tri-Valley in IRS audits, appeals and tax dispute resolution from its Pleasanton office, a short drive from downtown Livermore. Our practice areas page outlines that tax work, and our overview of tax attorney services in the Bay Area covers related IRS issues.
Frequently asked questions
Do I have to attend my audit if I have a representative?
Generally, no. A representative with a valid power of attorney can usually attend on your behalf, although the IRS can issue a summons requiring a taxpayer to appear in some circumstances.
How far back can the IRS audit?
The general rule allows the IRS three years from the date a return was filed to assess additional tax. The period can be longer when income was substantially understated, and there is no limit when a return was never filed or was fraudulent.
Can I still appeal if I already signed the examination report?
Signing an agreement form usually allows the IRS to assess the tax, which limits pre-assessment appeal options. Other routes, such as audit reconsideration or a refund claim, may still be possible depending on the facts.
What happens if I ignore an audit letter?
The IRS can disallow the items under review and propose additional tax, penalties and interest, eventually issuing a Notice of Deficiency. Responding, even to ask for more time, keeps more options available.
If you are facing an IRS audit or a tax balance in Livermore, call (415) 754-0115 to schedule your free consultation, or reach us through our contact page. Have the audit letter and your return for the year in question ready, and an attorney can review your situation and the deadlines that apply.
Attorney Advertising. This article is general legal information for Bay Area residents, not legal advice, and does not create an attorney–client relationship. Every situation is different — please consult a licensed attorney about your specific circumstances.