What Are My Rights and Risks with the IRS?
By Will Abberger, Enrolled Agent, former construction CFO · Published August 5, 2026You have specific, enforceable rights any time the IRS (Internal Revenue Service) contacts you — they're formally codified in the IRS's own Taxpayer Bill of Rights. Most contractors have never read them and don't know they apply. Your biggest risks, meanwhile, are rarely about dishonesty — they're about 1099 classification, payroll tax timing, and sales tax rules that are easy to get wrong without construction-specific guidance.
Your Rights as a Taxpayer
The IRS publishes ten formal rights under the Taxpayer Bill of Rights. The ones that matter most to a contractor facing an audit or notice:
- The right to be informed — you're entitled to clear explanations of the laws, IRS procedures, and what any notice you receive actually means.
- The right to challenge the IRS's position and be heard — you can raise objections and provide documentation, and the IRS is required to consider it fairly.
- The right to appeal an IRS decision in an independent forum — you're not stuck with a single agent's determination; there's a formal appeals process separate from the examination itself.
- The right to retain representation — you can have an authorized representative (an EA, CPA, or attorney) act on your behalf, including choosing not to speak with the IRS directly yourself.
- The right to a fair and just tax system — the IRS is required to consider facts and circumstances that might affect your ability to pay or your underlying liability, not apply a one-size-fits-all standard.
What an EA Can Do to Protect Those Rights
As an Enrolled Agent (EA), I'm federally licensed to represent you before the IRS directly — in audits, appeals, and collections matters — the same representation rights as an attorney or CPA in front of the IRS. A standard bookkeeper cannot do this. In practice, that means:
- Representing you directly in an IRS audit, rather than you facing it alone or through a third party.
- Handling appeals and collections matters — payment plans, penalty abatement requests, and related correspondence — on your behalf.
- Speaking for you with full authority, because the EA credential comes directly from the IRS itself, not a state licensing board.
The Biggest Risks Most Contractors Don't See Coming
- 1099 misclassification — treating someone as a subcontractor who, under IRS rules, functions more like an employee. This is one of the most common construction-industry audit triggers.
- Payroll tax deposit timing — payroll tax deposits are due on a strict schedule, and being short on cash doesn't extend the deadline. Missed deposits generate penalties fast.
- Florida sales tax on materials — the rules differ depending on whether you're performing a lump-sum contract or a retail sale of materials, and getting this wrong is easy to do without construction-specific guidance.
What To Do About It
Clean, current, monthly bookkeeping is the single biggest thing that reduces IRS exposure — it means payroll tax deposits are made on time, 1099s are issued correctly, and if a question ever does come in, you have documentation instead of a scramble.
Most contractors' IRS problems weren't caused by dishonesty — they were caused by bookkeeping that fell behind. Staying current is the entire strategy, and it's the one most within your control.
Want this handled every month? Clean monthly financials are the best defense. Our construction fractional CFO service keeps them current and coordinates with your CPA, and Will, as an IRS Enrolled Agent, can represent you directly if an issue comes up.
Frequently Asked Questions
Do I have to speak with the IRS myself?
No — the right to retain representation means you can have an EA, CPA, or attorney speak for you, including declining to answer questions directly yourself.
What's the difference between an EA and a CPA for IRS matters?
Both can represent you before the IRS with full rights. An EA credential is issued directly by the IRS and is specifically focused on taxation, rather than the broader scope a CPA license covers.
What's the most common IRS risk for trade contractors specifically?
1099 misclassification of subcontractors is one of the most common triggers, along with late payroll tax deposits during cash-tight periods.
If I get an audit notice, what should I do first?
Know that you have the right to representation before you respond — contact someone with representation rights, like an EA or CPA, before you provide any documentation or statements.