Many tax lawyers believe that the IRS’s greatest weapon is the use of fear. After 35 years of tax practice, I am still astonished at some of the things IRS agents tell my clients before they retained a tax representative:
So today we will address some of the common misconceptions in dealing with those few IRS agents who behave abusively:
1. Don’t let an IRS agent audit you at your home or business. That is almost never necessary. Let her go to your accountant’s office and stay clear of her hourly musings and distractive chatter.
2. Don’t think for a minute you have to have receipts for all your expenses. There is no such requirement in the federal tax code. In fact, the Courts allow you to estimate your expenses in a variety of different ways.
3. The auditor is not going to arrest you at the audit hearing. He or she lacks the authority to do so no matter how much they may dislike you.
4. There is nothing wrong with your refusing to extend the statute of limitations. It doesn’t reflect poorly on you or your case. The 3 year limit on audits is a Taxpayer right – a protection from old issues long forgotten. There is rarely a good reason to give the auditor still more time to audit you – and possibly disallow even more deductions.
5. The IRS is not going to seize and sell your assets if you don’t agree to the audit results. The audit is just the first step in a long process of multiple appeals and review. The auditor can’t assess the tax against you – just propose it. The assessment is actually barred until the appeals have concluded – often two years or more later.
6. Don’t be bullied into signing an audit report you don’t agree to. Appeal it. And if you did get bullied into signing, hire a representative and we can have the IRS reopen the audit with a different agent.
7. Don’t assume the IRS appeals agent will just rubber stamp the auditor, that they are “old friends” or that their manager “carries a lot of weight”. Over the years I’ve seen IRS appeals officers drop cases without a hearing simply because they were nonsense from the beginning.
8. Penalties are not automatic. IRS agents frequently threaten to impose every imaginable penalty to pressure you into settling. The truth is almost all of them can be abated if you acted reasonably. Since penalties carry interest, and can be almost as much as the taxes, don’t be frightened into settling just to “get the case over with”.
9. It is misleading when they tell you most Taxpayers lose in Tax Court. Most cases are settled before trial, often at the appeals level. Most Tax Court cases are cases the IRS knows it will win and may want to use to set precedent to deter others.
10. You can collect attorney and accounting fees from the IRS. Because of an El Paso painter, the rules for collecting these fees from the IRS are significantly less difficult to satisfy.
11. Don’t believe the threat if you lose the IRS will come knocking at your door and take everything. The truth is you’ll know months in advance how much you’ll owe, and if you have a good tax representative you’ll also know what alternative resolutions will be available.
Folks, I urge you not to allow an IRS government bureaucrat to cause you to live in fear. Hire a good tax representative that doesn’t have an 800 number. Educate yourself on the strengths and weaknesses of your case, likely outcome, and possible resolution. Then fix it.
And most of all keep hope alive for your God, your family, and your career.