What to do if you become the subject of an IRS investigation

On Behalf of | Aug 9, 2022 | Tax Audits

Sometimes, you find out because you get a letter in the mail. The Internal Revenue Service (IRS) is often very forthright about its intention to investigate a taxpayer. They may send you a letter advising you of the investigation and possibly even asking for your assistance by requesting that you send certain documentation to help the IRS complete its investigation.

Other times, you may learn from someone in the human resources department at work that there were requests for your internal tax documents and payroll records. You may have heard something from your accountant that made you realize the IRS wants to scrutinize your financial records more carefully.

Once you understand that you are the subject of an IRS investigation, you will want to take certain, specific steps to protect yourself.

Seek professional guidance

Do not assume that you can handle a major tax issue without help. If there is one most common mistake committed by those facing allegations of tax evasion or tax fraud, it is that they allow hubris to affect their decision-making.

They assume, for example, that accountants from the IRS won’t have the social skills to make them feel pressured in an interview, so they assume that their charismatic nature will help them move through the process with few challenges. Other times, they may underestimate exactly how thorough the IRS is when gathering evidence and preparing a case. They may fail to understand the terminology used and how the words that they choose during a conversation could help the state build a case against them.

Most people dealing with tax controversies will do themselves a serious disservice if they try to handle the whole situation on their own. If you bring in a lawyer, you will have someone there to handle negotiations and tough conversations on your behalf. You will also have someone who can explain the allegations that led to the investigation and what kind of evidence will be necessary to counter those allegations.

Start gathering and reviewing financial records

Unless you already keep all of your most important financial paperwork together as digital files, you may quickly realize how hard it is to gather everything for your defense planning or to provide requested documents to the IRS.

Gathering your own records and going over them with the lawyer who will help you will make it easier for you to prove there was no misconduct or to develop a workable strategy for pushing back against the claims made by the IRS. Your lawyer could also help you negotiate a payment arrangement or navigate the complex process of claiming innocent spouse relief if you never personally knew about the tax issues previously.

Getting the right help when dealing with civil and criminal tax issues will reduce your chances of lasting financial or legal consequences.