Work with experienced attorney to navigate IRS investigation, P.3
In recent posts, we’ve been commenting on the importance of working with an experienced attorney to navigate the tax audit process. One of the reasons for this, we’ve pointed out, is smooth handling of an audit on the taxpayer’s part can help ensure that the IRS does not impose penalties that aren’t warranted by the facts of the case.
In addition, a skilled attorney can work to ensure that the IRS, after evaluating the evidence in the case, properly applies penalties. For one thing, this means that any penalties applied should have a legal basis in the Internal Revenue Code or other authority. The IRS is not supposed to impose penalties as part of an effort to solicit a taxpayer’s cooperation or because the taxpayer was uncooperative in the investigation.
In addition to having a sound basis in law, any tax penalties the IRS seeks to impose are supposed to be applied fairly and consistently. If the IRS seeks to impose penalties without a proper basis, or in an unfair or inconsistent manner, objections can be made. The way penalties are calculated is particularly relevant here.
The IRS uses specific formulas to calculate tax penalties, and it shouldn’t necessarily be assumed that calculations are always done correctly. When tax errors are found in the audit process, it is also important to ensure that the tax examiner can clearly identify the “badges” discovered during the investigation and how those findings affect the penalty computation.
An experienced tax attorney cannot, of course, guarantee a favorable result in the tax audit process, as this depends largely on the facts of the case. What can be guaranteed is that a committed advocate will zealously advocate for the interests of his or her client and do everything possible to provide the best opportunity for a favorable outcome to the audit process.
Source: Internal Revenue Manual, Part 4: Penalty Considerations, Section 6: Penalty Considerations