IRS Civil Tax Controversies

IRS Civil Tax - Civil Tax Investigation & AuditIn fiscal year 2010, the Internal Revenue Service (or "IRS") budget grew to $12.2 billion.  This was an increase of $386.7 million, the majority of which was directed to the enforcement budget of the IRS, which totals $5.5 billion. And, according to National Taxpayer Advocate Nina Olson, “[t]he conventional wisdom seems to be that more hard-core enforcement actions like liens and levies mean more revenue.”1

Civil Tax Investigation & Audit

Unfortunately, all of this means that more individuals are being investigated.  If the government suspects you of tax wrongdoing, you might be subject to a civil IRS audit (or even a criminal tax investigation).  This can happen for a number of reasons:

  • IRS Informant. You were reported to the IRS by a disgruntled ex-employee, business competitor, or ex-spouse.
  • Tax Shelter. You allegedly participated in an allegedly abusive tax shelter. Often you were advised by lawyers or C.P.A.s with good reputations the tax shelter was legal. Sometimes it was; the law just changed. In a very serious and dangerous game of musical chairs where you thought you were following the law, the music suddenly stops, and you were left without a chair to sit on.
  • IRS Revenue Officer or Agent. You were contacted by an IRS Revenue Officer (or "IRS RO") or Revenue Agent (or "IRS RA"). His job is to collect money.
  • Unpaid Taxes. You haven’t been able to pay the taxes.
  • Non-Filer. You haven’t filed a tax return - possibly ever or for several years. You may have had a divorce, a death in the family, an illness, no income, or bad advice you trusted.
  • Innocent Spouse. You are or have an innocent spouse who was not involved in the tax planning.
  • Suspicious Activity Report. You are or were represented by someone on a Suspicious Activity Report.  Or worse, you were represented by someone who was incompetent, but you didn’t know it. These are reports generally filed by bank officials, usually secretly informing the government they have suspicions about you, their customer.
  • Random Audit. Your tax return was chosen at random.
  • The IRS suspects you of failing to report all of your income, claiming false deductions, failing to collect or pay employment or payroll taxes, failing to file returns or preparing false returns, a scam to evade taxes, or a conspiracy to impede or obstruct the IRS.

These investigations and audits often target doctors, business owners, other types of business professionals, tax preparers, small businesses, and corporations.  They can lead to excessive tax liabilities or even referrals for criminal prosecution.