Starting in October, 2007, the Internal Revenue Service will soon be conducting a Random Audit Program. This type of Random Audit was done in the past, sometimes with unpleasant results.
According to the Wall Street Journal (“The Next Audit Scare,” by Tom Herman, June 13, 2007) the Internal Revenue Service plans to revive its controversial practice of randomly selecting thousands of taxpayers for audits even when there is no reason to suspect any wrongdoing. The first audits will begin in October, 2007, and will target 13,000 people of various incomes for Tax Year 2006.
The reason for this program may be because the IRS is under pressure from Congress, which is struggling with budget deficits, to take action on the gap between what the government is collecting each year and what the government feels it should be collecting.
The amount of this “difference” is estimated to be $290 billion. Random tax audits have troubled many people in the past. In the 1990’s, when the IRS imposed a similar program, many of these targeted individuals felt the audits were invasive. Individuals were made to produce vast amounts of paperwork to support even trivial items on their returns.
What will the “new and improved” Audit Program look like this time around? Some people chosen for this auditing may not even realize it’s happening to them. The audit will all be done completely by computer without their knowledge. The IRS will be able to check the information by making comparisons of what the person reports on their return against what was reported by employers and financial institutions. Many people will need to endure face-to-face meetings with IRS Agents in order to examine their numbers in greater detail.
And what was the track record of the IRS like, when we think back to those bad old days of the IRS Audit? Not completely flawless, it turns out. According to CNN.com (All Politics, April 28, 1998, “Senate Panel Hears Stories of Alleged IRS Abuses”) a Senate committee commenced hearings on the abuse of power by the IRS. There was testimony from taxpayers about IRS Agents “stepping over the line” even raids on peoples’ homes, IRS Agents behaving “out of control” and acting “undisciplined.” These Agents were described as “intrusive” and “intimidating.” During these hearings, Cody Mayo, an Assistant DA in Caddo Parish, Louisiana, described how one individual actually experienced an emotional breakdown during an audit, and how another case tragically resulted in the victim’s suicide.
There was testimony that the IRS retaliated against whistleblowers. Yvonne DesJardins, of IRS Employee and Labor Relations, appeared as a surprise witness. She described how people who just wanted to do the right thing were “ostracized,” and their “careers destroyed.” Meanwhile, IRS officials who engaged in any misconduct were protected — or even rewarded.
What will you do if you sadly discover that you need to persevere through one of these face-to-face audits? You might feel that you need help.
Do Taxpayers Have Any Rights? Thankfully, Taxpayers do in fact have rights. In fact, many of us might not know that there is a “Taxpayer Bills of Rights.” (IRC Section 7521) Some highlights of the “original” Taxpayer Bill of Rights include the following:
1. Taxpayers have a right to an explanation of the audit process, their appeal rights, and the collection process;
2. Taxpayers have a right to be represented by a representative authorized to practice before the IRS;
3. Taxpayers have a right to suspend an interview to consult with a representative, provided the interview was not arranged through the use of an administrative summons; and,
4. Taxpayers have a right, with advanced notice to the IRS, to make an audio recording of any IRS interview.
Of course, the revised Taxpayer Bill of Rights (TBOR) is much longer and much more complex. You can view this entire thirty-page long document by going to the IRS website www.IRS.gov.