IRS Expanding Audits to Unrelated Tax Years and Tax Matters - John R. Dundon II, Enrolled Agent
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IRS Expanding Audits to Unrelated Tax Years and Tax Matters

IRS Expanding Audits to Unrelated Tax Years and Tax Matters

According to the Treasury Inspector General for Tax Administration (TIGTA) the IRS needs to expand audits to other tax years and tax matters when large dollar amounts are involved in a preexisting audit making it all the more important to know exactly what you are doing when communicating with the IRS. A couple of general rules of conduct are in order.  First you want to create the perception that you are working to help the Revenue Agent or Officer ‘close’ your file which is manifested in timely responses and general communication.  Second you want to answer the SPECIFIC QUESTION ASKED and nothing more.  If the Revenue Officer or Agent asks you what time it is, don’t tell them how to build a watch. This only invites opportunity for further inquiry and probing.

Here’s what the TIGTA Report concluded verbatim and how the IRS responded:

“TIGTA identified three factors that likely contributed to our concerns with expanding audits. First, the IRS strives to keep its audit inventories free of old tax year returns. As a result, tax compliance officers seldom expand an audit to a taxpayer’s prior year return. Second, case file documentation does not indicate that tax compliance officers are taking full advantage of the IRS’s internal sources of information when conducting required filing checks. Third, the IRS’s performance feedback mechanisms are not always taken advantage of to hold tax compliance officers accountable for the quality of their filing checks.

TIGTA recommended that the Director, Exam Policy, Small Business/Self-Employed Division, provide: 1) detailed examples to tax compliance officers on when it would be appropriate to expand audits to prior and/or subsequent year returns, 2) information to tax compliance officers that focuses on using the IRS’s automated information systems to enhance the quality of required filing checks, and 3) additional guidance to first-line managers to improve the feedback provided to tax compliance officers on the quality of required filing checks.

In their response to the report, IRS officials agreed with the recommendations and plan to: 1) provide examples in internal publications that show when it is appropriate to expand audits, 2) conduct a workshop on using IRS automated systems, and 3) improve the feedback provided to tax compliance officers on the quality of their filings checks. Although IRS officials agreed with all three recommendations, they did not agree with the potential monetary benefits associated with the recommendations.

To view the report, including the scope, methodology, and full IRS response, go to:

http://www.treas.gov/tigta/auditreports/2011reports/201130084fr.html.



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