May 17, 2016
By Dan Gibson CPA, EA
Often, the Internal Revenue Service conducts interviews that I affectionately refer to as the ‘meet and greet conference’ prior to the start of an audit. This is where the IRS asks a number of questions to the representative, accounting personnel and owner. Depending on the revenue agent, this meeting could last anywhere from 30 minutes to 2 hours. The line of questioning usually sets the tone for the audit by asking questions regarding the business, accounting procedures, banking practices, etc.
Have you ever considered turning the table and asking your own questions to set your tone for the upcoming audit? Here are a few things you might want to inquire about:
Ask to see the agent’s identification. Not just their business card, but their badge. Check their name and identification number. You’ll also want to make sure that the agent is in fact a revenue agent, not an agent from the IRS’ criminal investigation division. This is especially true if you are seated across the table from 2 or more agents. If you find that the agents are from the criminal investigation division, note their contact information, promptly end the meeting and then contact a criminal tax attorney.
If the agent is a revenue agent, ask if they have had any contact with the criminal investigation division regarding the case or have spoken to a technical fraud advisor. If the answer is yes, as with the above situation, exit the meeting promptly and contact a criminal tax counsel.
Another area of concern should be third party contacts. Ask the agent if any third parties have been or will be contacted. First of all, this may provide insight into what areas the IRS is focusing on. Another reason is that these contacts or future contacts by the IRS may have a devastating effect on the business of the taxpayer. By knowing who has been contacted, the representative can alert the taxpayer who can then reach out and save a potential disruption with a valued customer, vendor or lending source. For any third parties that the IRS wants to contact but has not yet done so, the representative can seek other options that may satisfy the IRS needs.
Everyone has a boss. So the representative should always make sure they have contact information for an agent’s supervisor. One, the representative is putting the agent on notice that if the audit goes south, a call to the agent’s supervisor is not far behind. Second, in the heat of an audit, the agent may not be so willing to give out that information. There are alternative ways of getting this information, but they can take time.
Now that you know who the boss is, it makes sense to find out what involvement the agent’s supervisor has had on the case. Revenue agents don’t just pick up a return and start auditing. Normally, returns are pulled from a pool of returns based on a variety of criteria. Once pulled, a surveyor provides the human touch and identifies issues on the return. These returns end up in office with an audit group. The IRS’ practice is that an audit planning meeting be conducted between the revenue agent and his or her supervisor. This meeting outlines issues and timing for the audit. The taxpayer representative will want to know what the issues are and the audit timing. This will assist the representative in keeping the agent within the scope of the planned audit and help prevent them from swaying into other areas.
In addition to the questions above, the representative should be providing the agent with direction on how they should be conducting their audit.
First, as the representative that has power of attorney, the agent should be instructed to speak to no one at the client location without approval from the taxpayer representative.
Second, the agent should be instructed to make no copies of documents themselves. If there is a need to make copies, the representative will arrange for copies to be made.
Third, if additional documents are needed, the request for those documents should be submitted by way of an individual document request to the representative.
Lastly, the representative should request that the agent provide a progress report at the end of every day and identify any issues that are developing.
Everyone has a job to do, including IRS revenue agents. However, taxpayer representatives have a job to do as well, which is to zealously represent their clients. This includes monitoring the agents assigned to their clients to insure that the audit is conducted in the most effective and efficient manner.
Don’t forget to sign up for our June 15 presentation on “Dealing with the IRS Audit Division, Part 2”. You can register here.