The cost of representation for an IRS tax audit varies significantly depending on the complexity of your case and the experience and qualifications of the person representing you. Audit representation fees can be charged either as an hourly rate or a flat fee. Generally, flat fees will be charged for straightforward cases whereas hourly fees will be charged for complex cases that may require a lot of additional work.
Audits can only be done by a CPA. It would depend on how organized your records are and how many of them there are. Depending on where you live a CPA is going to charge between $150 and $500 per hour, even more if your return is complex.
The Kind of Audit Requested
There are three kinds of tax audits that can be requested. They are always initiated via mail and never by telephone, email, or social media. They are:
- Correspondence audit (conducted entirely by mail)
- Office audit (conducted at an IRS area office)
- Field audit (conducted at the audit subject’s home or place of business)
Generally, random audits that are simply checking up on W-2 employees are conducted by mail. You will not have to speak with an IRS agent face-to-face or have an IRS agent visit you in your home.
Business audits and audits that are initiated due to suspected tax debt are conducted at your nearest IRS area office (an office audit) or your registered residence or workplace (field audit). Office and field audits are much more detailed and put you at a greater risk of revealing more information than you need to, which is why it’s worth getting professional representation for these kinds of audits.
Because there is more work involved in office audits and field audits (such as preparing multiple documents as well as handling several phone calls and in-person meetings), tax audit representation fees tend to be higher for these kinds of audits.
If you want a tax professional to stand in for you completely, you will need to sign a power of attorney authorizing this person to represent you. However, the good news is that once the POA is signed, you can direct the IRS agent to your representative for all subsequent communication.
Highest Cost: Criminal Prosecution
If an IRS tax audit reveals that you or your business has been involved in criminal activity and you are prosecuted by the Department of Justice, you may need to get a criminal lawyer and pay legal fees in addition to the tax audit representation fees you already paid. Cases that involve criminal prosecution can cost tens of thousands of dollars in legal fees.
Audited Financial Statements – The Benefits
FAQ
How much does a financial statement audit cost?
What is an audited P&L?
How much does a small-business audit cost?
How much does a financial review cost?
How much does an audit cost?
However for the purpose of calculating an average cost of an audit as a percentage of the revenues of the clients, one of the researches by Audit Analytics has come up with the following table: Between 2010 to 2016, audit fees increased steadily, climbing to £7.16 billion in 2016 from £5.92 billion in 2010.
Are financial audits expensive?
Financial audits are expensive. There’s no way to beat around the bush, when we talk about costs and “audits.” They’re never cheap, if done properly by a reputable Certified Public Accountant (“CPA”). Rarely, if ever will you be able to call a random CPA and obtain a quote for an audit.
Who audits a profit & loss statement?
Annual and quarterly documents such as profit-&-loss statements are routinely audited by Certified public accountants (CPAs) at publicly traded companies. Profit-&-loss statements, also referred to as p&l statements, are financial reports that indicate a company’s ability to manage expenses and income according to the Corporate Finance Institute.
What are audit and non-audit fees?
Audit and non-audit fees are as reported in annual reports for European listed and Canadian listed companies. Audit and non-audit fees are as reported in annual reports and proxy statements for US listed companies. Fees only apply to the statutory audit firm. Audit fee as a percentage of revenue is calculated on an individual company basis.