These are the most detailed level of IRS investigation and are conducted by Revenue Agents. All IRS Revenue Agents are accountants who have completed substantial accounting coursework and have undergone a high level of training. In addition, most Revenue Agents specialize in a particular industry and therefore have a variety of experiences dealing with taxpayers in your industry.
Normally, the agent will emphasize:
- whether all income was appropriately included on a return; and
- whether deductions were taken in compliance with the Internal Revenue Code.
It is not unusual for an agent to perform a full reconciliation of a taxpayer’s return with their books, bank records, and other information. The agent will look for flaws and other discrepancies with the return and will open up multiple years if s/he finds an issue that warrants further investigation. In addition, during audits of closely held corporations or other small businesses, it is not unusual for the Revenue Agent to examine the tax returns of major corporate shareholders and officers.
Revenue Agents also conduct Financial Status Audits designed to investigate lifestyle expenditures. To the extent that expenditures exceed reported sources of income, the agent will automatically presume the underreporting of income. The burden rests with the taxpayer to prove that income was not underreported. Revenue agents frequently check property records, DMV registrations, credit databases, as well as statistics based on the taxpayer’s zip code and have usually reviewed this information prior to conducting a field audit.
We strongly advise you to obtain the assistance of a qualified tax attorney immediately once you have been notified of a field audit. Although Revenue Agents should maintain impartiality during the course of an audit, the function of their job is to uncover discrepancies with income and deductions. The time and expense of a field audit is not undertaken without some suspicion that you owe additional tax. The Revenue Agent is there to find flaws associated with your tax return and is not easily deterred from his/her task.
Agents may seem friendly, but often a pleasant demeanor is used to garner information from the taxpayer. This information is often later used against the taxpayer at various stages of the audit. Even innocent sounding questions are designed to probe information from the taxpayer. Agents are also required to report potential criminal behavior to the Criminal Investigations Division (CID) of the IRS. Even honest mistakes may expose taxpayers to criminal prosecution, regardless of intent. Furthermore, Revenue Agents are less inclined to take aggressive or unreasonable positions when working in a professional setting with experienced tax counsel, because of the very likely possibility of working with an attorney at a later point. Our firm frequently deals with the same groups of Revenue Agents and has established a great working relationship with them. We can use our past experiences to your benefit whereas the Revenue Agent knows they will probably never encounter the individual taxpayer again.
If you have any questions or are in need of further assistance, please contact an attorney our San Diego office today.
If you have any questions or if we can further assist you, please contact our San Diego IRS audit attorneys today.
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