Ask The Lawyer: Q: I am being audited by the IRS. At what point should I seek representation?
Posted Jun 18, 2021 2:40PM EDT
Q: I am being audited by the IRS. At what point should I seek representation? I feel as though I have done nothing wrong or deceitful. I have prepared my taxes myself with Turbo Tax.
A: Being audited by the IRS is extremely stressful, as I and the member asking this question know. Having had my own fun with the IRS, I would advise you to immediately find and hire a tax lawyer. Say little or nothing to any IRS examiners on the phone. Also, if you are asked to come in for an interview, and are not represented by counsel, take a tape recorder in with you. They agent will immediately stop the interview and reschedule. It won't stop them from taking further action but will buy you a little time. Seek a tax attorney who is an enrolled agent; which is a designation licensed by the IRS. They know all the tricks. But don't mess with the IRS; they can and WILL seize any assets they can find (bank accounts are esp. vulnerable). Don't try to hide anything -- that will open you to criminal charges.
I recommend going to the National Association of Tax Professionals (www.natptax.com) or going to www.taxprofessionals.com to find a competent tax attorney near you. If you owe taxes and can't pay, you can usually work out an installment agreement, allowing you to pay an amount monthly. In some cases, you may be able to negotiate an offer in compromise which can result in you negotiating a lump-sum payment, often pennies on the dollar. But negotiating this is not for the faint-hearted. IRS Collections Agents are pretty cold and HATE to reduce your tax debt. And, like the saying "the only things certain are death and tase", the IRS is heartless, particularly when the debt results from an employers' failure to withhold employees taxes. I had a cousin, a physician, who had not paid his employees required FICA taxes (a REALLY BIG no-no) for several years, apparently. My cousin subsequently died unexpectedly. Before his death, I recall him unsuccessfully trying to borrow money from other family members.
After his death, the IRS seized his house and most of the contents and sold everything it could attach to satisfy this debt, leaving his widow with very little.
However, when dealing with an unpaid tax debt, in the US, you cannot go to jail for that debt -- there is no "debtors prison" here. However, tax fraud IS criminal and you can go to jail for that, as Al Capone famously learned.
Now, the IRS doesn't always bear bad news. In our member's situation, the audit was because they had flagged several expenses and he had incorrectly reported some income twice (an error TurboTax hadn't caught, by the way) and the audit resulted in him receiving a refund. So, the lessons here (there are two) are, unless you yourself are an accountant, use a professional tax preparer to do your taxes and, if you are called in by the IRS for an audit or other reason, consult a competent tax attorney.
ALERT: There are scammers claiming to be from the IRS demanding immediate payment or they send the police to arrest you or some such threat. They almost always demand payment in the form of a pre-paid debit card or BitCoin. First, the IRS will ALWAYS send a letter (often by registered mail). -- never contact you by phone. JUST HANG UP. Another scam I've seen (I've received several such calls) is someone claiming to be from Social Security and telling you there is "a problem" that will "cancel" your Social Security. Just for fun, I talked with the caller, who had a heavy foreign accent. I asked for her ID number and she gave me a fake number. I told her I was Sergeant Sphincter from the Postal Inspector's Office and immediately, the line went dead. Social Security will never initiate contact with you in a phone call. DON'T FALL FOR IT.
Stephen welcomes your questions about legal issues related to older gay men. Please read his bio and disclaimer and contact him through the form at the bottom of it if you have a question for him.