ASK THE EDD LAWYER- IS YOUR IRS AUDIT TAKING TOO LONG? INTERESTING ACTION BY CONGRESS.
By Robert S. Schriebman
We handle quite a few business and personal IRS audits in our office. Over the past couple of years we have noticed that these IRS audits never seem to end. The IRS starts off auditing one year and extends the audit into new years as soon as the taxpayer files a tax return. IRS audits are very stressful, and they can be costly especially when the audit is unduly prolonged. Interest on any IRS tax assessment continues to compound daily from the original due date of the return. If an audit drags on for more than one year you have to factor in additional daily compounding interest for that year. One of the ways to control the length of time an IRS audit takes is to think twice before giving the IRS an extension of time by signing an IRS audit extension form. However, this can backfire on you because the auditor may disallow otherwise allowable deductions because he or she did not properly budget the time factor it takes to do the audit. If you do sign the statute extension you have placed yourself in a position of having to incur more daily compounding interest on whatever is eventually assessed. This can be a no win situation for any taxpayer.
Congress has become concerned about the time the IRS is taking on audits. At the end of February 2014, Senate Bill 2044 was introduced. SB 2044 is a bill designed to improve the transparency and efficiency of the IRS with respect to audits and communications between the IRS and taxpayers under examination. The bill is known as the “Taxpayer Accountability Act.” The bill has three parts: (1) a deadline for responses to taxpayer correspondence, (2) taxpayer notification of disclosures by IRS of taxpayer information, (3) deadline for conclusion of audits of individual taxpayers. SB2044 does not apply to IRS audits of corporations, partnerships, LLCs, or LLPs.
With regard to the deadline for responses to taxpayer correspondence, the IRS must respond to taxpayer correspondence within thirty (30) days. This response must go to the heart of the taxpayer inquiry. The IRS cannot just send a letter acknowledging receipt of that correspondence.
If the IRS discloses taxpayer information to third parties it must notify the taxpayer within thirty (30) days. The IRS must tell the taxpayer what was disclosed, when it was disclosed, and to whom it was disclosed. This new rule will not apply to any ongoing IRS criminal investigation or anything else that is deemed to be sensitive or a risk to national security.
The final part of the bill deals with forcing the IRS to conclude an audit promptly. Any audit of a tax return of an individual by the IRS shall be concluded not later than one year after the initiation of the audit.
I am sure that SB 2044 will be modified as the bill winds its way through the legislative process. I will keep you posted.
An EDD lawyer, Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States.
As a trusted EDD attorney, Robert S. Schriebman has successfully dedicated more than 30 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments.
Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House and the only 2 books ever published dealing with how California Employment Development Department (EDD) operates. See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure,” both published by Commerce Clearing House.