IRS Audit Responsibility and Taxpayer's Rights

It may be advisable before you start submitting your data to an IRS Agent in an IRS audit to know taxpayer's rights:

1) You are entitled to IRS representation. You can have a CPA, a tax attorney or an IRS enrolled agent to represent you in your tax audit. If it is an individual tax audit, you do not have to face the IRS auditors and answer their questions. It is your right. Your CPA or representative can answer on your behalf after interviewing you. If you are a business entity, you can avoid the personal interview but the agent has the right to tour the place.

Touring your place of business is significant.

The IRS Auditor is sniffing and observing. He looks at your inventory; he sees how many people you have and so on. This observation can help him determine the level of activity and perhaps the level of income and the type of expenses he will expect to see in your financial statements. Obtaining tax help in this regard will be a good idea. A competent CPA is valuable IRS help in this regard.

It must be said that that IRS representation is not absolute right. If your tax attorney, CPA or enrolled agent unnecessarily delay dispensing of the information requested to conduct an IRS audit, the IRS has the right to contact you directly. The auditor must however, obtain his group manager’s approval before he takes this step.

2) IRS audit should not be more than once for the same tax year.  They should not look at the books several times. They can handle the same year relating to an assessment of some tax problem such as assessment of additional tax deficiency, correcting mathematical errors or a claim of refund by the taxpayer.  Taxpayer should not be audited on the same item more than once if the audited items did not result in any adjustment against taxpayer.

3)  You also have the right to obtain taxpayer information about you in the IRS records under Freedom of Information Act. The IRS may have the right to withhold some information that it deems exempt from FOIA but generally you are entitled to see your records and identify any tax problems you may be facing or may be brewing. This right also applies to any IRS settlements relating to tax collections. 

4) Taxpayer in a tax audit is entitled to an explanation of the tax audit process including tax audit appeal. Typically the agent will hand you a brochure explaining the taxpayer's rights and the tax audit process.

5) Finally, the taxpayer is entitled to what is called Taxpayer Assistance Order (TAO). This order is issued by the Taxpayer Advocate. Many times the issues that you cannot resolve through the normal channels can be resolved by the Taxpayer Advocate.  The Advocate knows how to navigate the IRS and can solve the IRS tax problems faster and perhaps more equitably.