Audit Defense

Receiving an audit notice from the IRS or a state tax authority is one of the most unsettling experiences a business owner, executive, or high earner can face. The instinct is often to panic — or worse, to respond without proper representation and inadvertently make the situation significantly worse.

At Blackridge Tax, we handle audits differently. We do not simply react to what the IRS or state tax authority puts in front of us. We take control of the process — managing every interaction, controlling the flow of information, and positioning your case for the best possible outcome from the very first response.

When you retain Blackridge Tax for audit defense, you do not speak to the auditor. We do. Every document produced, every question answered, and every position taken is carefully considered and strategically managed to protect your interests throughout the entire process.

Types of Audits We Handle

The IRS and state tax authorities conduct several types of audits — each with different levels of complexity, risk, and required response. Regardless of the type of audit you are facing, the worst thing you can do is ignore it. Failure to respond does not make an audit go away. It guarantees the worst possible outcome.

Correspondence Audits — Tax Return Compliance Letters

The IRS frequently sends computer-generated letters asserting that a specific item on your return contains a possible error and that an automatic adjustment has been made. What many taxpayers do not realize is that these automated adjustments can often be successfully challenged — if you know the tax regulation that entitles you to the deduction, credit, or exemption in question.

We have handled numerous cases where the IRS's automated system generated letters that the client's original tax preparer was unable to defend. Many preparers rely heavily on software without fully understanding how the underlying tax is being calculated. At Blackridge Tax, we understand these letters, we know the regulations, and we will defend every legitimate claim on your return.

CP2000 Notice — Underreported Income

The CP2000 is an automated IRS notice informing you that the income reported on your return is less than the total income reported to the IRS by third parties — employers, financial institutions, clients, and others. By the time you receive this notice, you will likely already owe an accuracy-related penalty and interest on the assessed amount.

At Blackridge Tax we review every CP2000 notice carefully — not just to address the underreported income, but to identify any additional credits or deductions that can offset the assessment and reduce what you owe.

Office & Field Audits — In-Person Examinations

A field audit is conducted by a local IRS Tax Examiner or Revenue Agent who schedules a meeting at your place of business, your home, or a local IRS office. These are the most comprehensive and intrusive type of audit — and they carry the highest risk for taxpayers who are not properly represented.

Many taxpayers attempt to handle field audits themselves, only to discover they have inadvertently opened themselves up to further scrutiny, additional years under examination, and significantly larger assessments. At Blackridge Tax, we manage every aspect of the in-person examination process — controlling what information is provided, how it is presented, and how the auditor's questions are answered.

Audit Statute of Limitations

The IRS generally has three years from the date a return was filed to assess additional tax through an audit examination. When that window is closing and an audit is still in progress, the IRS will often ask you to sign a waiver extending the statute of limitations.

This is a critical decision — and one that should never be made without experienced representation. Signing an extension can significantly affect the outcome of your case. Refusing to sign can cause the IRS to expedite their conclusions and impose extremely short deadlines to respond. At Blackridge Tax we evaluate every extension request carefully and advise our clients on the strategy that best protects their interests.

Notice of Deficiency

After the audit process concludes, the IRS issues a Notice of Deficiency — a statutory notice proposing additional tax owed. This is not a demand for immediate payment, but it is a formal legal document that gives you 90 days to file a petition with the United States Tax Court if you disagree with the IRS's findings.

Missing this deadline can permanently forfeit your right to challenge the assessment in Tax Court. If you have received a Notice of Deficiency — or if you missed one and an assessment has already been made against you — contact Blackridge Tax immediately. We can pursue Audit Reconsideration, obtain the audit report from the IRS for professional review, and determine the best available path forward.

State Tax Audits — California FTB, EDD & CDTFA

In most cases, when a federal audit concludes with an increase in assessed income tax, the IRS automatically shares that information with the state — triggering a corresponding state tax adjustment. California's Franchise Tax Board, Employment Development Department, and California Department of Tax and Fee Administration each have their own audit procedures, timelines, and resolution options.

California's state tax authorities are among the most aggressive in the country. When a business's books and records are inadequate, state auditors can rely on indirect audit methods to estimate sales volumes and income — resulting in astronomical assessments that bear little resemblance to reality. At Blackridge Tax, we represent clients before all California state tax authorities, challenge indirect audit methods, and fight for the most favorable resolution available under state law.

Understanding Your Audit

Unlike tax debt cases where the focus is on your ability to pay, audit cases center on documentation — specifically your ability to support the deductions, credits, and income figures reported on your return. The critical objective in any audit is to present your financial records clearly, concisely, and in a manner consistent with sound accounting principles.

Many clients come to us mid-audit having already discovered that their documentation is incomplete. This is not uncommon — and it is not the end of the road. A significant part of our audit representation involves reconstructing reasonable and defensible expenses to minimize the assessment of additional tax. Beyond documentation, we also focus on persuading the examining officer to adopt an audit methodology that is more appropriate to your specific industry and business practices — a strategy that can dramatically change the outcome of your case.