IRS Audit Attorney

With more than a decade of legal, business, and tax experience, the team at Milikowsky Tax Law is on hand to help defend your business in an IRS audit.

There are few things more threatening to a business owner than a letter from the IRS.

An audit can be a time-consuming process. While you cannot avoid a tax audit, you can minimize your risk of an audit by avoiding potential flags on their tax return. The most frequent IRS audits are caused by inconsistencies or errors in your tax return that raise red flags in the eyes of the IRS.

When you work with Milikowsky Tax Law, you get more than an experienced tax litigation attorney. You get an experienced business and tax advisor who can work with you to reduce your chances of being audited, with our comprehensive tax return assessment system and years of business experience.

California’s Top IRS Audit Attorney

Our leading tax litigation attorney, John Milikowsky, has decades of experience representing countless businesses in legal tax matters. Mr. Milikowsky is dedicated to relentlessly defending his clients in everything from state and federal tax audits to criminal tax investigations. As a full-service tax law firm, we frequently work with business owners to empower owners to identify issues on their own tax returns. While there is no way to guarantee you will avoid a tax audit, we can teach you to significantly minimize your risk of an audit.

Milikowsky Tax Law Defends Businesses in IRS Audits

When you’re faced with the formidable presence of a tax audit, don’t panic. Reach out to Milikowsky Tax Law, and we will protect your company to keep your business in business. Our skilled tax litigation attorneys will protect your rights every step of the way.

Whether you’ve just received a letter from the IRS, or you need help analyzing your legal rights and financial data reported on your tax returns, contact us today. The team at Milikowsky Tax Law is here to help.

San Diego Tax Attorney – Your Relentless Advocate in IRS Audits

Business owners may not be sure where to start if IRS audits their company. However, an IRS audit doesn’t have to overwhelm your life or impede your ability to conduct business. With the experienced team at Milikwosky Tax Law, you can navigate the process of an IRS audit secure in the knowledge that your tax attorneys are advocating for you every day.

There is little to no margin for error during an audit, a tight timetable, and potentially severe consequences for a poorly handled interaction with IRS. Unlike CPAs who do not have attorney-client privilege, attorneys are able to speak with your IRS officer on your behalf without risk of subpoena or summons of records discussed.  A qualified attorney can, review your documents with an expert eye, create the right strategy for you, represent you or your business, and provide valuable advice and guidance.

If you receive a letter from IRS confirming your business tax return has been selected for examination, review your return and identify the items that will likely be investigated so you can be prepared. Then, before communicating with IRS, reach out to an experienced IRS audit attorney. Having a game plan is critical. You want to be honest and prepared when speaking with your IRS revenue agent.

Anytime you file taxes, there is a chance that your tax return might be audited by the Internal Revenue Service (IRS). The agency conducts standard procedures to find any errors or discrepancies among taxpayers. The audit process is meticulous and, should you find yourself under the scrutiny of IRS, will require detailed information from you. 

In the article below, you’ll learn about the audit process and frequently asked questions surrounding IRS audits.

Why was I selected for an IRS Audit?

There are different reasons you may be flagged for IRS audits. Some are due to random checks; however, you have a low chance of being audited this way. Most taxpayers have less than a 0.6% chance of receiving a random audit check. 

IRS runs tax returns through its Discriminant Information Function (DIF) system to continually update their database and make sure they are tracking industry benchmarks for each industry and tax bracket. 

The DIF system also checks for incorrect tax filing information. Any discrepancies in tax forms, such as an imbalance of tax returns, a discrepancy between reported earnings and employer filings, or unreported cash transactions by one member of a transactional party, will trigger DIF to send your return to an IRS audit officer. 

People are more susceptible to an audit if they:

  • Earn less than $25,000 or more than $500,000
  • File incorrect or incomplete returns 
  • Have large numbers of cash transactions 
  • Claim a disproportionate number of deductions 
  • Are self-employed
  • Have a home-based business
  • Have a cash business 
  • Have foreign assets 

Sometimes you can be audited as a result of your business partners or investors going through an audit. 

How Will I Know If I am Selected for an Audit?

You will know if you are selected for an audit if you receive a verified letter in the mail from IRS. They do not call to notify you about your audit. 

What Do I Do If I’m selected for an Audit?

If you or your business are selected for an audit, make sure you read all of the information sent to you in your audit notification letter.  The letter and accompanying information request packet will notify you as to what entity is being audited (business or personal) what year(s) are under review and who your auditor is. Once you know what IRS needs, make sure you collect all of the records and supporting documentation requested (but nothing additional). You will need to submit records from banks, vendors, and businesses you have worked with, invoices and pay stubs, payroll records, and medical expenses among other information.

Should I Hire an IRS Tax Attorney to Help Me?

We suggest contacting a qualified tax attorney to help guide you through your audit, to ensure you are timely, responsive, compliant, and do not unintentionally increase the scope of your audit to other areas of your business or personal finances that would otherwise remain unscrutinized.. There is little to no margin for error during an audit, a tight timetable, and potentially severe consequences to a poorly handled interaction with IRS. Unlike CPAs who do not have attorney-client privilege, attorneys are able to speak with your IRS officer on your behalf without risk of subpoena or summons of records discussed.  A qualified attorney can, review your documents with an expert eye, create the right strategy for you, represent you or your business, and provide valuable advice and guidance. 

How long do I have to reply to an IRS audit?

You have 30 days to reply to the initial audit letter. Do not hesitate, and make sure you take the appropriate steps early on. IRS is not likely to provide extensions unless you have a good reason.  Your attorney can help by advocating for more time with the IRS agent.  A good attorney will know many of your local IRS auditors and have strong relationships built on well-structured prior cases and mutual respect. 

How Long Do Audits Take?

The time it takes to conduct an audit depends on the case. It fluctuates depending on:

  • The seriousness of the tax reporting error
  • When and whether the right information is provided to IRS
  • Communication between the person being audited and IRS officer

How Many Years of Tax Returns Can IRS audit?

IRS audits tax returns from the past three years; however, most are from the past two years. Only when IRS agents find discrepancies within the audit they are conducting do they dig for information older than three years. Most audits do not look for information past six years. Though in cases of criminal audits IRS can look back 9 years and longer. 

If you or someone you know received an audit letter from IRS, reach out to our expert team at Milikowsky Tax Law. We have over a decade of experience working with IRS and tax audits and are experts in defending business owners in the face of IRS or other government agency audits. 

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Don’t File Your 1099s Before Reading This

The 2024 1099 filing deadline is January 31, 2025. Preparing and submitting these forms accurately is not just about compliance—it’s about safeguarding your business from significant penalties and potential audits.

Understanding who needs to file, what transactions are reportable, and the common pitfalls can help you stay on track.

Why Filing 1099s is Important


Filing 1099s is a regulatory requirement that protects your business in case of audits. Failure to file can lead to serious consequences:

  • Expense Disallowance: During an audit, the IRS or State of California could disallow business expenses linked to payments that should have been reported on a 1099. This could inflate your taxable income significantly.
  • Federal Penalties: The IRS can impose a penalty of 27% on gross payments if 1099 forms were not filed as required.
  • State Reclassification Risks: California’s Employment Development Department (EDD) may reclassify independent contractors as employees, resulting in retroactive payroll taxes, penalties, and interest that could span up to three years.

Who Needs a 1099?


A 1099 is typically required for any payments over $600 made to individuals or entities providing services. Key scenarios include:

  • Service Providers: Payments for services such as marketing, consulting, or design work must be reported.
  • Rental Payments: If rent was paid to an LLC that isn’t a corporation, a 1099 is required.
  • Goods and Services: Payments that involve a combination of goods and services, such as manufacturing or modifications, may also require reporting.

Who is Exempt from 1099 Filing?


Some payments are exempt from 1099 reporting, including:

  • Small Payments: Transactions under $600 in total for the calendar year.
  • Credit Card Payments: If you paid using a credit card, the recipient will receive a 1099-K from their merchant processor, so you don’t need to file a 1099 for these payments.
  • Payments Solely for Goods: Transactions that only involve goods, with no service component, are not reportable.

Preparing Your 1099s


To ensure accurate 1099 filing, follow these steps:

  1. Review Payment Records: Examine bank statements, checks, and electronic payments to identify all transactions exceeding $600.
  2. Verify Recipient Information: Collect Form W-9 from each recipient to confirm details like name, Social Security Number (SSN), or Employer Identification Number (EIN).
  3. Classify Payments Correctly: Determine whether to report payments under the individual’s name and SSN or the business name and EIN.
  4. Summarize Transactions: Organize all payments by recipient to ensure accurate reporting on the 1099 forms.

Common Pitfalls to Avoid

  • Misclassification of Workers: Independent contractors who lack the characteristics of a business—such as other clients, a website, or an EIN—may be reclassified as employees by the IRS or EDD. This reclassification can lead to substantial payroll tax penalties.
  • Incomplete Information: Filing forms with errors, such as incorrect dollar amounts or mismatched EINs, can result in penalties or rejections.
  • Electronic Filing Requirement: Businesses filing 10 or more 1099s must do so electronically. Filing paper forms when exceeding this threshold can result in additional penalties.

Special Considerations in California

California takes an aggressive approach to auditing companies that file 1099s for independent contractors. If a contractor lacks evidence of operating as an independent business—such as multiple clients, a business license, or professional liability insurance—they may be reclassified as an employee.

For example, a part-time marketing consultant who only works for your business and lacks other clients or business assets could be deemed an employee. If the EDD audits your business, they can retroactively assess payroll taxes, penalties, and interest for up to 12 quarters (three years).

The Risks of Non-Compliance

Non-compliance with 1099 filing requirements can have a ripple effect on your business finances. If audited, the reclassification of contractors and the disallowance of expenses can lead to:

  • Increased taxable income due to disallowed deductions.
  • Payroll taxes on reclassified employees.
  • Interest and penalties that compound over multiple years.

Tips for Accurate Filing

  • Leverage Software: Consider using accounting software to track payments and generate 1099s.
  • Hire a Tax Professional: Consulting a tax attorney or CPA can ensure compliance and accuracy.
  • Plan Ahead: Collect necessary information from contractors throughout the year to avoid last-minute scrambling.

Final Thoughts

The January 31, 2025, deadline for 2024 1099 filings is an important date for businesses. Accurate preparation and filing protect your business from unnecessary penalties and audits. Taking the time to classify workers correctly, organize payment records, and file electronically when required will save you time, money, and potential legal troubles.

For more expert advice, contact Milikowsky Tax Law and ensure your 1099s are filed correctly.