Challenging the Admissibility of IRS Agent Testimony in California Tax Trials

 

Challenging IRS Agent Testimony in California Tax Trials

When the IRS brings a civil or criminal tax case to trial in California, it will often rely on IRS agents as witnesses. These agents may provide testimony on the examination of the taxpayer’s returns, interpretation of the tax laws, or calculation of the alleged tax deficiency or tax due. However, relying too heavily on IRS agents can backfire on the government if their testimony is excluded by the judge. This article will examine strategies for challenging the admissibility of IRS agent testimony in California tax trials.

File a Motion in Limine

One of the most effective ways to limit IRS agent testimony is to file a motion in limine before trial. This asks the judge to prohibit the government from introducing inadmissible evidence or making improper arguments. In the motion, the defense can identify the objectionable portions of the agent’s proposed testimony and explain why it should be excluded under the Federal Rules of Evidence or other authority.

For example, much of the agent’s testimony may constitute inadmissible hearsay, improper opinion testimony, or legal conclusions. The defense may argue that allowing such testimony would improperly sway the jury or invade the province of the court in determining the law. Filing the motion in limine allows the defense to frame the issues and set the stage for keeping inappropriate testimony out of the trial.

Object at Trial

If the judge denies the motion in limine or defers ruling, the defense will need to make timely objections at trial to preserve the issues for appeal. Objections should be specific, such as “Objection, hearsay,” “Objection, improper opinion testimony,” or “Objection, legal conclusion.” The defense should be prepared to explain the grounds for the objection and why the testimony should be excluded.

Judges have broad discretion over evidentiary rulings, so objections may not always succeed. But making a record through objections is critical for challenging the admissibility of IRS agent testimony on appeal. Failing to object could waive the issue entirely.

Cite the Federal Rules of Evidence

When objecting to IRS agent testimony, key rules of evidence to cite include:

• Hearsay – FRE 802
• Opinion testimony by lay witnesses – FRE 701
• Expert testimony – FRE 702
• Legal conclusions – FRE 704

IRS agents routinely provide testimony based on documents prepared by others, information supplied by third parties, or out-of-court statements by witnesses. This is classic hearsay barred by FRE 802. Agents also often give unqualified legal opinions or conclusions that usurp the role of the judge. FRE 701, 702 and 704 can exclude such problematic testimony.

Attack the Agent’s Qualifications

If the IRS offers the agent as an expert witness, the defense should thoroughly attack the agent’s qualifications under FRE 702. In criminal tax cases, the defense can file a Daubert motion challenging the reliability of the methods used by the agent and whether they are properly applied. The defense should also seek discovery into the agent’s background, training, skills, and other cases they testified in to look for weaknesses.

Agents routinely provide expert testimony on interpreting tax laws, reconstructing income, or calculating taxes owed. But many agents lack sufficient qualifications to be experts, making their testimony inadmissible under FRE 702. Challenging qualifications provides another avenue for exclusion.

Emphasize the Agent’s Bias

The defense should emphasize through cross-examination that IRS agents are inherently biased witnesses. Agents work for the government and their job is to audit taxpayers and assess tax deficiencies. They are not neutral experts. Pointing out this bias can undermine the credibility and persuasiveness of the agent’s testimony.

The defense can note how the agent stands to benefit professionally from securing a conviction or civil judgment. The defense can also highlight any mistakes, inaccuracies, or questionable judgment calls in the agent’s audit or investigation. Anything showing the agent rushed to conclusions or is overzealous helps reveal their bias.

Preclude Summaries or Charts

IRS agents frequently seek to introduce summary charts, calculations, or visual aids to help explain their testimony. However, summaries prepared specifically for trial are often inadmissible under FRE 1006 unless the defense has access to the underlying documents to verify accuracy. The defense should seek to exclude charts, summaries, or visual aids prepared by the agent for trial.

Carefully Cross-Examine

Effective cross-examination is key to discrediting IRS agents. The defense should bring out concessions casting doubt on the agent’s conclusions, emphasizing mistakes, inconsistencies, or lack of direct knowledge. Questions highlighting bias or deficiencies in investigation are also helpful.

The defense can also elicit favorable facts from the agent that support the taxpayer’s position. For example, showing the taxpayer cooperated fully, produced all requested documents, and had reasonable reliance on a tax advisor. IRS agents are trained witnesses, so cross must be carefully constructed. But patient, methodical questioning can reduce the persuasiveness of even seasoned agents.

Cite Tax Court Rules

In civil tax cases tried in U.S. Tax Court, rules specific to Tax Court can further limit IRS agent testimony:

• Experts – Rule 143
• Written expert reports – Rule 143(g)
• Basis for expert opinion – Rule 143(f)

These rules require written expert reports, disclosure of facts relied upon, and court approval of experts. They provide additional grounds for objecting to IRS agent testimony in Tax Court trials.

Argue Violations of Taxpayer Rights

In some cases, IRS agents obtain evidence or testimony through procedures that violate taxpayer rights. This can include violations of the Taxpayer Bill of Rights, IRS rules on summons procedures, or Constitutional protections. If agents exceed their authority or violate rights, their testimony could be suppressible.

For example, if the IRS examined records beyond the scope of a summons, the defense may seek to suppress that evidence and any resulting testimony as “fruit of the poisonous tree.” If agents interviewed the taxpayer without proper notice or Miranda warnings, those statements may also be excluded. The defense should aggressively pursue suppression whenever agent improprieties can be shown.

Seek to Exclude Testimony Entirely

In some circumstances, the defense may have grounds to exclude an IRS agent’s testimony entirely. For example, if the agent destroyed or failed to preserve critical evidence, relied on documents later found unreliable, or gave demonstrably false testimony in other cases, the agent could be prohibited from testifying. These situations are rare but can arise when agents are overzealous or act in bad faith.

The defense can also seek to exclude the agent under Rule 403 if their limited probative value is substantially outweighed by prejudice, confusion, or waste of time. In many trials, the defense may be better off without the agent’s testimony instead of attacking it on cross-examination.

File Complaints on Agent Misconduct

If an IRS agent violates rules or taxpayer rights, the defense should file a formal complaint. This creates a record of agent misconduct that could support excluding testimony. Complaints can be submitted to the Treasury Inspector General for Tax Administration (TIGTA) or IRS Office of Professional Responsibility (OPR).

Documenting improper behavior is key. The defense should follow up any verbal complaints with written records listing specifics of the agent’s wrongdoing. This provides important evidence if seeking suppression or total exclusion of testimony.

Challenge Basis for Expert Opinion

If an IRS agent testifies as an expert, the defense should vigorously challenge whether the agent has sufficient facts and data to support their opinion under FRE 702(b). Oftentimes, agents make assumptions or rely on third-party information that provides a weak foundation for expert conclusions.

The defense should seek discovery into what specific information the agent relied upon and then highlight any unsupported leaps, speculation, or lack of direct knowledge. Unless the expert can show their opinion has a solid factual basis, it may be excluded under FRE 702(b).

Cite Taxpayer Privacy Rights

IRS agents must comply with strict taxpayer privacy laws like 26 U.S.C. § 6103. If the agent improperly reviewed or disclosed returns or return information, their testimony could be suppressible under the exclusionary rule. Even minor breaches of confidentiality rules can support exclusion.

Highlight Contrary Authority

IRS agents frequently provide opinion testimony on the meaning of tax statutes, regulations, or case law. However, there are often good faith disagreements on the interpretation of tax laws. The defense should identify other authority contrary to the agent’s opinions to show their views are not definitive.

Citing rulings, cases, treatises, or articles supporting the taxpayer’s position diminishes the agent as the sole expert voice. Their interpretations become just one viewpoint among many, which reduces the weight jurors give to the testimony.

Challenge Penalty Determinations

In both civil and criminal tax cases, IRS agents routinely provide testimony on whether civil tax penalties like the accuracy, fraud, or delinquency penalties should apply. However, penalty determinations are ultimately legal questions for the court.

The defense should file motions in limine to exclude an agent’s opinion on appropriateness of penalties. Penalties also require factual determinations like the taxpayer’s state of mind, so agents should not speculate on these issues. Limiting penalty testimony prevents agents from usurping the court’s role.

Attack the Audit Methodology

The defense can challenge the reliability of an IRS agent’s conclusions by critiquing the methods used in the audit or investigation. If the agent failed to follow IRS procedures, missed documents, made unreasonable assumptions, or showed a bias against the taxpayer, the results may be unreliable.

In depositions and cross-examination, the defense should highlight every flaw, shortcut, or questionable choice made. Undermining the audit methodology weakens the foundation for the agent’s testimony.

IRS agents must comply with procedures in the Internal Revenue Manual (IRM). The IRM provides detailed instructions on how agents should conduct audits, examinations, and investigations.

If an agent violates these procedures, the defense can argue their testimony and conclusions are unreliable. For example, if the agent failed to properly document requests for information or did not provide a copy of the IRM during an interview, their testimony related to that interview could be challenged.

The defense should be familiar with key IRM sections related to audits, summons, and investigations to identify any missteps. Even minor deviations from the IRM can support excluding testimony if they undermine reliability.

Allege Due Process Violations

In some cases, IRS agents may obtain testimony or evidence in ways that violate a taxpayer’s due process rights. This could include lengthy interrogations without allowing the taxpayer to consult counsel, deception or intimidation to coerce cooperation, unreasonable delays in providing notices, or other conduct violating fundamental fairness.

If agents violate due process, the defense can seek to suppress any resulting testimony or evidence under the exclusionary rule. The defense should file motions detailing the specific due process breaches and their prejudicial effects. Significant violations could warrant total exclusion of the agent’s testimony.

Attack Credibility

A key strategy for undermining IRS agents is attacking their general credibility. The defense can review the agent’s personnel files, qualifications, and history of complaints or discipline to look for credibility issues. If the agent was disciplined for sloppy investigations or making false statements, this can be used to undermine their testimony.

The defense can also scour the agent’s testimony in other cases to find inconsistencies that cast doubt on veracity. And if the agent has a reputation among practitioners for stretching the truth or hassling taxpayers, this can be brought out through reputation witnesses. Damaging credibility reduces the weight jurors give to the agent’s testimony.

File Ethics Complaints

If an IRS agent acts unethically in the course of an audit or investigation, the defense should file complaints with the Treasury Inspector General for Tax Administration (TIGTA) and the IRS Office of Professional Responsibility (OPR). This creates a record of misconduct that could support excluding testimony.

For example, if the agent made misrepresentations to the taxpayer, abused the summons process, or violated confidentiality rules, ethics complaints documenting this misconduct help justify suppression. The defense should highlight any violations of the IRS Restructuring and Reform Act of 1998 or Taxpayer Bill of Rights.