IRS Audits and Collections
As a member of the US Tax Court Bar and as a former (now cleansed) attorney with the IRS, there is information I have about this organization and its practices that I take for granted but may be unknown and of value to each of you-so here is some of that information:
We all know that “power corrupts and absolute power corrupts absolutely.” Almost half of the IRS agents polled in a 1990’s survey admitted that they would use their position to harass taxpayers.
The IRS publicizes the fact that less than 2% is subjected to audits. This may be a valid number but it includes minimum-wage earners. For persons doing somewhat better than that and living in California (Los Angeles and San Francisco are routinely in the top-5 most most audited cities in the Country) the percentage is much higher.
The IRS uses a scoring system to evaluate tax returns for audits. If your score is high, your chances of being audited are perhaps 10x greater than published figures and the odds go up if your family income is approaching 6 figures.
When a tax return is given to an agent for audit, for all intents and purposes the judgment is in: the taxpayer owes! Small business owners are assumed to have cheated substantially. It is not easy for an agent to come back from an audit and tell his supervisor that no deficiency is due on a selected tax return.
Agents and tax collectors are regularly monitored to see that they bring in the money quickly and in volume. Their job security, promotions and other benefits are directly related to these factors. By the time a taxpayer is sitting face-to-face with an auditor and/or a tax collector, he or she has, in most cases, already been tried and found guilty. The rest of the process is just to organize the facts and figures to fit this prejudgment scenario.
Little or nothing in this process motivates an auditor or a tax collector to be objective and fair in their analysis of your information.
Ideally, one should be represented in an audit or tax collection matter. Agents are schooled in “amicably” presenting themselves to a taxpayer in a manner of questioning so that tax liabilities are generated.
Of course the economic realities of having legal representation needs to be evaluated on a case by case basis. We invite you to call for a free telephone evaluation of whether or not a tax audit or collection matter can be cost effectively handled by our offices on your behalf. If not, we may still have some important ideas to help you handle the matter. Do let us hear from you.