Speak with a team who understands 480.729.8000
Tapping the Equity in Your Home

Tapping the Equity in Your Home

Over time, the value of your home has grown and your mortgage balance has been reduced (or even eliminated). The equity (the property’s value minus any liens against it) you now have in your home is a reservoir of funding potential. You may decide to tap into it for various purposes, such as remodeling your home, paying off high-interest loans or credit card debt, buying a car, or sending your child to college.

The pros and cons

Home equity financing (which may be set up as either a loan or a line of credit) is secured by the equity you’ve built up in your home. This type of financing has several advantages compared to other forms of personal loans:

  • Higher borrowing limits
  • Favorable interest rates
  • Tax-deductible interest–if you itemize your deductions on your federal income tax return, you may be able to deduct the interest on up to $100,000 ($50,000 if married filing separately) of home equity debt.

There can be drawbacks, however:

  • You may have to pay closing costs and other fees
  • If you sell your home, you’ll have to repay the outstanding balance
  • Since your home is collateral securing the debt, you run the risk of foreclosure if you can’t make your payments

Home equity loans

Often referred to as a second mortgage, a home equity loan generally allows you to borrow a fixed amount of money (typically up to 80 percent of your equity) at a fixed rate of interest. The total amount you borrow is advanced to you when you sign for the loan. You’ll repay the loan with equal monthly payments over a fixed term.

Home equity lines of credit

When you arrange a home equity line of credit, your lender establishes a revolving credit limit determined in part by the amount of your equity. You then borrow only what you need (up to the maximum allowed) only when you need it (subject to any time limit on the borrowing period). You can access the funds either by writing a check or using a credit card associated with the account.

The interest rate for a home equity line of credit is generally a variable rate tied to an index. Your monthly payments may vary, depending on your outstanding balance and the prevailing interest rate. You may have the option of making interest-only payments over the course of the repayment period (e.g., 10 years), or minimum payments that cover a portion of the principal plus accrued interest, coupled with a balloon payment of principal at the end of the loan’s term.

Choosing between the two

When deciding whether to apply for a home equity loan or a line of credit, it’s important to consider how much you’ll need and how soon you’ll need it.

If you want a fixed amount of money for a specific purpose (e.g., remodeling the kitchen), you may wish to take out a home equity loan that advances you the total amount up front. If instead you’ll need an indeterminate amount over a few years (e.g., funds for ongoing college expenses), you may benefit most from a home equity line of credit that you can draw on when needed.

Shop around for the best deal

Whatever choice you make, you’ll want to shop around to find the most favorable rates and terms. Here are a few things to consider:

  • In an effort to attract your business, a lender may be willing to absorb or waive some or all of the costs (e.g., application fees and points) of obtaining the financing
  • The frequency of variable interest rate adjustments and any caps on rate increases will affect the overall cost of a home equity line of credit
  • If you’re considering a home equity line of credit, find out if you have the option to convert the line to a fixed-rate, fixed-term loan in the future
  • When comparing a home equity line of credit to a home equity loan, don’t rely solely on the annual percentage rate (APR) as a measure of cost, because the APR for a home equity loan takes points and financing charges into consideration while the APR for a home equity line of credit does not

Disclosure:The content provided in this publication is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Sterling Group United recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.

Contemplating Bankruptcy

Contemplating Bankruptcy

Filing bankruptcy can be complex and difficult, and it can have lasting effects. You should consider what’s involved carefully before deciding if it’s the right answer for you. Don’t expect bankruptcy to offer you an easy solution to your overspending habits or financial mismanagement. It’s intended to relieve you of burdensome debts incurred due to unfortunate circumstances such as medical problems or unemployment.

To file or not to file

How do you know if you should go bankrupt? If your situation is temporary and will change for the better in the near future, you may just need some breathing room. Contact your creditors; they may offer to lower your payments or interest rate under a hardship program. Or perhaps a credit counseling service can help you restructure your debt and get on your feet again. In fact, for bankruptcy filings, credit counseling is a prerequisite.

Then again, you may not see your income going up in the foreseeable future, or maybe you can’t cut your living expenses any further. Perhaps your pleas to restructure your debt have fallen on deaf ears or the relief you’ve been offered isn’t enough to help. Maybe now it’s time to consider bankruptcy.

Personal bankruptcy in general

There are two types of personal bankruptcy, Chapter 7 and Chapter 13. Under Chapter 7, assets are sold to pay creditors and the debt that’s left is discharged. If you file under Chapter 13, on the other hand, you probably won’t have to sell assets, but all of your disposable income will go to pay creditors for a specified period of time, most likely five years.

Each chapter has its own rules regarding what assets you can keep and what debts you can be discharge (some debts, such as student loans, are non dischargeable), among other things.

How Chapter 7 works

Generally, Chapter 7 is a liquidation proceeding with the court determining what property, if any, you have to sell to pay your debts.

By law, you get to keep certain exempt property. There are federal bankruptcy exemptions and each state has its own exemptions. Depending on the state in which you live, you may be able to choose between the federal or state exemptions, or you may have to use your state’s exemptions. Exemptions generally include specific amounts for your home, car, jewelry, tools of trade, household goods and furnishings, and retirement savings.

Property that is not exempt may be sold to repay your creditors (at least in part). Unsecured debts that remain unpaid are then discharged, with certain exceptions such as tax debts, student loans, domestic support payments, and debts resulting from fraud or driving while intoxicated.

If you go bankrupt against a secured debt, such as a mortgage or a car loan, the collateral securing the debt will either revert to the lender. Or, it will be sold with the proceeds going to the lender as at least a partial satisfaction of that secured debt.

How Chapter 13 works

Under Chapter 13, often referred to as wage earner’s bankruptcy, you aren’t required to sell assets to satisfy creditors. Instead, your debts are reorganized under a plan and you repay them, fully or partially, over a three-year or five-year period with your disposable income (money you have left over after meeting your normal monthly living expenses). If you complete the plan successfully, unsecured debts that remain unpaid are then discharged, with certain exceptions.

Chapter 13 is often used to forestall and ultimately prevent foreclosure on real property, such as your home. To accomplish this, you would have to continue to make your regular monthly payments directly to the mortgage lender, plus you make separate catch up payments on overdue amounts according to a schedule spelled out in the Chapter 13 plan. If you complete the repayment schedule successfully, your mortgage would again be considered up to date.

Determining whether to file under Chapter 7 or Chapter 13

An income eligibility test will be applied to all Chapter 7 petitions; if your income is above the median income level in your state, and you’re capable of repaying a specified portion of your unsecured debt, you’ll be required to file under Chapter 13.

Life after bankruptcy

A bankruptcy notation will appear on your credit report for 10 years. It’s a serious blemish that can affect you in many ways. Aside from the difficulty it will cause when you try to get new credit, insurance companies may correlate your ability to pay your debts with your ability to make premium payments. As a result, a bankruptcy notation on your credit report may make it difficult to get certain types of insurance. What’s more, an employer may take your credit history into account when deciding to hire or promote you.

Of course, you’ll be able to get credit again, but you may have to pay higher interest rates or provide a cosigner or collateral to get started. Getting new credit will help you establish a new track record. But be careful; you won’t be able to declare bankruptcy again for several years.

Disclosure:The content provided in this publication is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Sterling Group United recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.

Understanding Mutual Fund Share Classes

Understanding Mutual Fund Share Classes

When investing in a mutual fund, you may have the opportunity to choose among several share classes, most commonly Class A, Class B, and Class C. The differences among these share classes typically revolve around how much you will be charged for buying the fund, when you will pay any sales charges that apply, and the amount you will pay in annual fees and expenses. This multi-class structure offers you the opportunity to select a share class that is best suited to your investment goals.

The costs associated with mutual funds

Mutual funds have costs that are passed on to investors. It’s important for you to understand what the different costs are, since these are usually deducted from the money you’ve invested and can affect the return of your investment over time.

Typically, mutual fund costs consist of sales charges and annual expenses. The sales charge, often called a load, is the broker’s commission, deducted from your investment when you buy the fund, or when you sell it. The annual expenses cover the fund’s operating costs, including management fees, distribution and service fees (commonly known as 12b-1 fees), and general administrative expenses. They are generally computed as a percentage of your assets and then deducted from the fund before the fund’s returns are calculated.

So which share class should you choose? The answer to that depends on two factors: how much you want to invest and your investment time horizon.

Class A shares

Class A shares may appeal to you if you’re considering a long-term investment of a large number of shares. When you purchase Class A shares, a sales charge, called a front-end load, is typically deducted upfront, thus reducing the actual amount of your initial investment. For example, suppose you decide to spend $35,000 on Class A shares with a hypothetical front-end sales load of 5 percent. You will be charged $1,750 on your purchase, and the remaining $33,250 will be invested.

However, Class A shares offer you discounts, called breakpoints, on the front-end load if you buy shares in excess of a certain dollar amount. Typically, a fund will offer several breakpoints, so the more you invest, the greater the reduction in the sales load.

You may also qualify for breakpoint discounts by signing a letter of intent and agreeing to purchase additional shares within a certain period of time (generally 13 months), or by combining your current purchase with other investment holdings that you or your spouse and children have within the same fund or family of funds (called a right of accumulation). Since rules vary, read your fund’s prospectus to find out how you may qualify for available breakpoint discounts, or contact your investment advisor for more information.

Class A 12b-1 fees tend to be lower than those of other share classes, thus reducing your overall costs. This may make Class A shares more attractive to you if you wish to hold on to the fund for a longer period of time.

Class B shares

Class B shares may appeal to you if you wish to invest a smaller amount of money for a long period of time. Unlike Class A shares, there is no up-front sales charge, so all of your initial investment is put to work immediately. Class B shares have a back-end load, often called a contingent deferred sales charge (CDSC) that you pay when you sell your shares. The load usually decreases over time (typically 6 to 8 years), although this varies from fund to fund. By the end of the time period no charge applies. At that stage your shares may convert to Class A shares.

Before you purchase Class B shares, however, make sure that this investment fits in with your overall goals. Class B 12b-1 fees can be considerably higher than for Class A shares, so the cost of investing large amounts over time might be more than you would like. In addition, you don’t benefit from the breakpoint discounts available with Class A shares, and you must pay the CDSC if you sell your Class B shares within the time limit. You should also keep track of when your shares convert to Class A shares, especially if your account has been transferred from one brokerage to another.

Class C shares

When you purchase Class C shares, a front-end load is normally not imposed, and the CDSC is generally lower than for Class B shares. This charge is reduced to zero if you hold the shares beyond the CDSC period, which for Class C shares is typically 12 months. For those reasons Class C shares may be appropriate if you have a large amount to invest and you intend to keep the fund for less than 5 years.

However, like Class B shares, the 12b-1 fees are greater for Class C shares than for Class A shares. Unlike Class B shares, these expenses will not decrease during the life of the investment, because C Class shares generally don’t convert to Class A shares. In addition, there are no breakpoints available for large purchases.

Other options

Some mutual funds may not offer all three share classes and others may offer different classes, such as hybrid load shares or mid-load shares.

Another option you may consider is a no-load mutual fund that you can purchase directly from an investment company or through an investment advisor. As the name implies, these funds have no front-end or back-end loads, and their expenses are typically lower than for other share classes. Before you decide if these shares are suitable for you, you should look at their past performance and also at any expenses that may apply.

Do your homework

  • Check out the mutual fund in advance. Read the prospectus carefully, especially the discussion of fund classes and fees and how they apply to you.
  • Make sure you understand how breakpoints work and how to take advantage of them.
  • Compare the fees and expenses of different fund classes, to see how purchasing different share classes can affect your return. Take into account your investment amount, the length of time you plan to hold the fund, and the expenses and share load per share class.
  • Review your mutual fund holdings regularly. Keep yourself informed of possible upcoming deadlines, such as an impending breakpoint, or when any Class B shares you may own are scheduled to convert to Class A shares.
  • Keep your broker informed. To take advantage of all breakpoint discounts, you need to tell your broker about (a) your holdings within the mutual fund, and those of your family, (b) your holdings at other brokers, (c) any additional purchases you may have in mind.

Don’t go at it alone

As you consider how best to invest in mutual funds, keep in mind that there’s no guarantee any mutual fund will achieve its investment objective. You should discuss all of your investment goals with a qualified financial professional. Contact us today and schedule a complimentary consultation with one of our expert financial advisors. We can review your current financial situation, and make sure that you are making the best decisions for your financial future.

Disclosure:The content provided in this publication is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Sterling Group United recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.

Tax Planning for the Self-Employed

Tax Planning for the Self-Employed

Self-employment is the opportunity to be your own boss, to come and go as you please, and oh yes, to establish a lifelong bond with your accountant. If you’re self-employed, you’ll need to pay your own FICA taxes and take charge of your own retirement plan, among other things. Here are some planning tips.

Understand self-employment tax and how it’s calculated

As a starting point, make sure that you understand your federal tax responsibilities. The federal government uses self-employment tax to fund Social Security and Medicare benefits. You must pay this tax if you have more than a minimal amount of self-employment income. If you file a Schedule C as a sole proprietor, independent contractor, or statutory employee, the net profit listed on your Schedule C is self-employment income. It must be included on Schedule SE, which is filed with your federal Form 1040. Schedule SE is used both to calculate self-employment tax and to report the amount of tax owed.

Make your estimated tax payments on time to avoid penalties

Employees generally have income tax, Social Security tax, and Medicare tax withheld from their paychecks. But if you’re self-employed, it’s likely that no one is withholding federal and state taxes from your income. As a result, you’ll need to make quarterly estimated tax payments on your own to cover your federal income tax and self-employment tax liability. You may have to make state estimated tax payments, as well. If you don’t make estimated tax payments, you may be subject to penalties, interest, and a big tax bill at the end of the year.

If you have employees, you’ll have additional periodic tax responsibilities. You’ll have to pay federal employment taxes and report certain information. Be sure to stay on top of your responsibilities.

Employ family members to save taxes

Hiring a family member to work for your business can create tax savings for you; in effect, you shift business income to your relative. Your business can take a deduction for reasonable compensation paid to an employee, which in turn reduces the amount of taxable business income that flows through to you. Be aware, though, that the IRS can question compensation paid to a family member if the amount doesn’t seem reasonable, considering the services actually performed. Also, when hiring a family member who’s a minor, be sure that your business complies with child labor laws.

As a business owner, you’re responsible for paying FICA taxes on wages paid to your employees. The payment of these taxes will be a deductible business expense for tax purposes. However, if your business is a sole proprietorship and you hire your child who is under age 18, the wages that you pay your child won’t be subject to FICA taxes.

As is the case with wages paid to all employees, wages paid to family members are subject to withholding of federal income and employment taxes, as well as certain taxes in some states.

Establish an employer-sponsored retirement plan for tax (and nontax) reasons

Because you’re self-employed, you’ll need to take care of your own retirement needs. You can do this by establishing an employer-sponsored retirement plan. This can provide you with a number of tax and non tax benefits. With such a plan, your business may be allowed an immediate federal income tax deduction for funding the plan. As well, you can generally contribute pretax dollars into a retirement account.

Contributed funds, and any earnings, aren’t subject to federal income tax until withdrawn. As a tradeoff, tax-deferred funds withdrawn from these plans prior to age 59½ are generally subject to a 10 percent premature distribution penalty tax. As well as ordinary income tax, unless an exception applies. You can also choose to establish a 401(k) plan that allows Roth contributions. With Roth contributions, there’s no immediate tax benefit. But, future qualified distributions will be free from federal income tax. You may want to start by considering the following types of retirement plans:

  • Keogh plan
  • Simplified employee pension (SEP)
  • SIMPLE IRA
  • SIMPLE 401(k)
  • Individual (or “solo”) 401(k)

The type of retirement plan that your business should establish depends on your specific circumstances. Explore all of your options and consider the complexity of each plan. And bear in mind that if your business has employees, you may have to provide coverage for them as well. For more information about your retirement plan options, consult a tax professional or see IRS Publication 560.

Take full advantage of all business deductions to lower taxable income

Because deductions lower your taxable income, you should make sure that your business is taking advantage of any business deductions to which it is entitled. You may be able to deduct a variety of business expenses. This includes, rent or home office expenses, and the costs of office equipment, furniture, supplies, and utilities. To be deductible, business expenses must be both ordinary and necessary. If your expenses are incurred partly for business purposes and partly for personal purposes, you can deduct only the business-related portion.

If you’re concerned about lowering your taxable income this year, consider the following possibilities:

  • Deduct the business expenses associated with your motor vehicle, using either the standard mileage allowance or your actual business-related vehicle expenses to calculate your deduction
  • Buy supplies for your business late this year that you would normally order early next year
  • Purchase depreciable business equipment, furnishings, and vehicles this year
  • Deduct the appropriate portion of business meals, travel, and entertainment expenses
  • Write off any bad business debts

Self-employed taxpayers who use the cash method of accounting have the most flexibility to maneuver at year-end. See a tax specialist for more information.

Deduct health-care related expenses

If you qualify, you may be able to benefit from the self-employed health insurance deduction. This would enable you to deduct up to 100 percent of the cost of health insurance that you provide for yourself, your spouse, and your dependents. This deduction is taken on the front of your federal Form 1040 when computing your adjusted gross income, so it’s available whether you itemize or not.

Contributions you make to a health savings account (HSA) are also deductible “above-the-line.” An HSA is a tax-exempt trust or custodial account you can establish in conjunction with a high-deductible health plan to set aside funds for health-care expenses. If you withdraw funds to pay for the qualified medical expenses of you, your spouse, or your dependents, the funds are not included in your adjusted gross income. Distributions from an HSA that are not used to pay for qualified medical expenses are included in your adjusted gross income, and are subject to an additional 20 percent penalty tax unless an exception applies.

Disclosure:The content provided in this publication is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Sterling Group United recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.

Merging Your Money When You Marry

Merging Your Money When You Marry

Getting married is exciting, but it brings many challenges. One such challenge that you and your spouse will have to face is how to merge your finances. Planning carefully and communicating clearly are important, because the financial decisions that you make now can have a lasting impact on your future.

Discuss your financial goals

The first step in mapping out your financial future together is to discuss your financial goals. Start by making a list of your short-term goals (e.g., paying off wedding debt, new car, vacation) and long-term goals (e.g., having children, your children’s college education, retirement). Then, determine which goals are most important to you. Once you’ve identified the goals that are a priority, you can focus your energy on achieving them.

Prepare a budget

Next, you should prepare a budget that lists all of your income and expenses over a certain time period (e.g., monthly, annually). You can designate one spouse to be in charge of managing the budget, or you can take turns keeping records and paying the bills. If both you and your spouse are going to be involved, make sure that you develop a record-keeping system that both of you understand. And remember to keep your records in a joint filing system so that both of you can easily locate important documents.

Begin by listing your sources of income (e.g., salaries and wages, interest, dividends). Then, list your expenses (it may be helpful to review several months of entries in your checkbook and credit card bills). Add them up and compare the two totals. Hopefully, you get a positive number, meaning that you spend less than you earn. If not, review your expenses and see where you can cut down on your spending.

Bank accounts–separate or joint?

At some point, you and your spouse will have to decide whether to combine your bank accounts or keep them separate. Maintaining a joint account does have advantages, such as easier record keeping and lower maintenance fees. However, it’s sometimes more difficult to keep track of how much money is in a joint account when two individuals have access to it. Of course, you could avoid this problem by making sure that you tell each other every time you write a check or withdraw funds from the account. Or, you could always decide to maintain separate accounts.

Credit cards

If you’re thinking about adding your name to your spouse’s credit card accounts, think again. When you and your spouse have joint credit, both of you will become responsible for 100 percent of the credit card debt. In addition, if one of you has poor credit, it will negatively impact the credit rating of the other.

If you or your spouse does not qualify for a card because of poor credit, and you are willing to give your spouse account privileges anyway, you can make your spouse an authorized user of your credit card. An authorized user is not a joint cardholder and is therefore not liable for any amounts charged to the account. Also, the account activity won’t show up on the authorized user’s credit record. But remember, you remain responsible for the account.

Insurance

If you and your spouse have separate health insurance coverage, you’ll want to do a cost/benefit analysis of each plan to see if you should continue to keep your health coverage separate. For example, if your spouse’s health plan has a higher deductible and/or co-payments or fewer benefits than those offered by your plan, he or she may want to join your health plan instead. You’ll also want to compare the rate for one family plan against the cost of two single plans.

It’s a good idea to examine your auto insurance coverage, too. If you and your spouse own separate cars, you may have different auto insurance carriers. Consider pooling your auto insurance policies with one company; many insurance companies will give you a discount if you insure more than one car with them. If one of you has a poor driving record, make sure that changing companies won’t mean paying a higher premium.

Employer-sponsored retirement plans

If both you and your spouse participate in an employer-sponsored retirement plan, you should be aware of each plan’s characteristics. Review each plan together carefully and determine which plan provides the best benefits. If you can afford it, you should each participate to the maximum in your own plan. If your current cash flow is limited, you can make one plan the focus of your retirement strategy. Here are some helpful tips:

  • If both plans match contributions, determine which plan offers the best match and take full advantage of it
  • Compare the vesting schedules for the employer’s matching contributions
  • Compare the investment options offered by each plan. The more options you have, the more likely you are to find an investment mix that suits your needs
  • Find out whether the plans offer loans. If you plan to use any of your contributions for certain expenses you may want to participate in the plan that has a loan provision

Disclosure:The content provided in this publication is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Sterling Group United recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.

Surviving an Audit

Surviving an Audit

Even the most honest of taxpayers can be left trembling at the thought of an IRS audit. Let’s face it–it’s right up there with public speaking. To survive an audit, you’ve got to arm yourself with information. You should understand what the audit process is all about. You need to understand why your return was audited and what your rights and responsibilities are. Most importantly, how you can appeal the findings.

An audit is not an accusation of wrongdoing

An IRS audit is an impartial review of your tax return to determine its accuracy. It’s not an accusation of wrongdoing. However, you must demonstrate to the IRS that you reported all of your income and were entitled to any credits, deductions, and exemptions in question.

The IRS generally must complete an audit within three years of the time the tax return is filed. Unless, tax fraud or a substantial underreporting of income is involved.

Certain returns run a greater risk of audit

Several factors can lead the IRS to single out your return for an audit. Taxpayers who are self-employed, receive much of their income in tips, or run cash-intensive businesses historically have faced a greater likelihood of audits. The IRS may also pay more attention to professionals such as doctors, lawyers, and accountants. If your itemized deductions in several major categories are greater than the statistical average, you’ll generally have an increased chance of being audited. Other red flags may include a return:

  • That is missing required schedules or forms
  • Signed by a preparer associated with problems in the past
  • Reporting income of at least $200,000

There are three types of audits

If you are to be audited, the IRS will inform you by telephone or letter. There are three types of audits:

  • A correspondence audit: This is typically for minor issues and requires only that you mail certain information to the IRS. Pheraps you forgot to attach a Schedule C to your income tax return. The matter will be closed if the IRS is satisfied with your paperwork.
  • An office audit: Here, you’d typically bring your tax-related records to an IRS office for examination. If you claimed an unusually high deduction for medical expenses, the IRS may want to see your medical bills and canceled checks.
  • A field audit: Here, the auditor generally visits your home or business to verify the accuracy of your tax return. It may be possible for the auditor to visit the office of your representative, instead.

Know your rights regarding the audit

You have several rights when you’re involved in an audit. These include, the right to:

  • A professional and courteous treatment
  • An explanation of the audit process
  • Representation
  • Know why the IRS is asking for information, how the information will be used, and what will happen if the information is not provided
  • Appeal decisions

Audit survival tips

Consider the following when you are audited:

  • Request a postponement to gather your records and put them in order
  • Be sure to read IRS Publication 1 (Taxpayers’ Bill of Rights) before your audit
  • Before your initial interview with the IRS agent, meet with your representative to discuss strategies and expected results
  • Bring to the audit only the documents that are requested in the IRS notice
  • Be thoroughly prepared–if your records clearly substantiate the items claimed on your return, the agent won’t waste time conducting a more in-depth audit
  • Be professional and courteous
  • Do not volunteer information to the IRS agent; if you have a representative, he or she should respond to the agent’s questions
  • Don’t lie
  • Keep detailed records of any materials that you submit to the agent and of any questions asked by the agent
  • Ask to speak to the auditor’s supervisor if you think that the agent is treating you unfairly
  • When you get the examination report, call the auditor if you don’t understand or agree with it
  • If you don’t agree with the audit results, request a conference with a manager, and know your appeal rights

You can appeal if you disagree with the audit result

You can either agree or disagree with the auditor’s findings. If you agree, you’ll complete some paperwork and pay what’s owed. If you disagree with the auditor, the issues in question can be reviewed informally with the auditor’s supervisor. Or, you can appeal to the IRS Appeals Office, which is independent of the local office that conducted the audit. You can appeal the auditor’s findings by sending a protest letter to the IRS within 30 days of receiving the audit report. If you do not reach an agreement with the appeals officer you may be able to take your case to the U.S. Tax Court, U.S. Court of Federal Claims, or U.S. District Court where you live.

Disclosure:The content provided in this publication is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Sterling Group United recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.