How to Prevent IRS Abuse of Power During Investigations

How to Prevent IRS Abuse of Power During Investigations

Dealing with the IRS can be scary. An audit or investigation can make anyone feel anxious and worried. While the IRS does important work to enforce tax laws, sometimes they can overstep or abuse their power. As a taxpayer, you have rights. Understanding those rights is key to protecting yourself during an IRS inquiry.

This article will explain common problems with IRS investigations and audits. It will give practical tips to prevent IRS abuse of power. With the right information, you can feel empowered to assert your rights during the process.

Know Your Rights

The first line of defense is knowing your taxpayer rights. These are spelled out in the Taxpayer Bill of Rights. Some key rights include:

• The Right to Be Informed – You have the right to know why the IRS is contacting you, the basis for any charges, and your rights as a taxpayer.
• The Right to Challenge – You can challenge the IRS’s position and provide additional documentation.
• The Right to Appeal – If you disagree with the outcome, you can appeal the decision.
• The Right to Finality – You have the right to know the maximum amount you owe and when the audit is finished.
• The Right to Privacy – Any IRS inquiry has to comply with the law to protect your private information.
• The Right to Confidentiality – You can expect discretion from the IRS about the issues under review.

Print out a copy of the Taxpayer Bill of Rights and keep it handy. Bring it to any audit or interview. Politely assert your rights throughout the process.

Request Clear Explanations

During an investigation, the IRS must clearly explain what they are reviewing and why. You have the right to know the basis for any additional tax, penalties, or charges. If something is unclear, keep asking questions until you understand.

Some key questions to ask:

• What specific issues are you looking into and why?
• What information do you have that led to this inquiry?
• What laws, regulations, or policies apply here?
• How did you determine the amounts you are questioning?
• What is the timeline for the investigation moving forward?

Document the questions you ask and the answers you receive. Having clear explanations in writing protects you down the road.

Record Interviews

One problematic IRS tactic is not allowing taxpayers to record interviews. The IRS manual gives agents broad discretion about whether to allow recording. However, as a taxpayer you have the right to ask to record any in-person interview. Getting denied can be a red flag of improper behavior.

To protect yourself:

• Request to record any interview as soon as it starts.
• Get the denial to record in writing, along with the agent’s justification.
• Take detailed notes of any interview questions and your responses.
• Follow up in writing with the agent to clarify any uncertainties.

These steps don’t guarantee the ability to record. But they do establish evidence if anything improper occurs.

Avoid Intimidation Tactics

IRS agents sometimes use intimidating tactics to get taxpayers to agree to their terms. Threats of criminal prosecution or other scare tactics should raise red flags. Here are some intimidation ploys to watch out for:

• “You’re in serious trouble if you don’t cooperate.”
• If you don’t agree now, we’ll have to move forward with criminal charges.
• “You could go to jail if you’re hiding anything from us.”
• “We won’t stop until we find something. This can drag on if you don’t resolve it now.”

If you feel pressured or threatened, take a stand. Calmly but firmly tell the agent you will not discuss the matter further without your representative present. End the conversation if needed until you get help.

Bring a Representative

Having legal counsel or a tax professional by your side is critical. They can serve as a witness and help assert your rights. Some key ways a representative can help:

• Ensure proper procedures are followed.
• Clarify complex tax issues.
• Request documentation that supports the IRS’s position.
• Provide additional documentation to refute IRS findings.
• Negotiate a settlement or payment plan if needed.

The IRS must suspend an interview if you state you want counsel present. Be firm about this requirement if they resist. Paying for representation is highly advisable, but the Taxpayer Advocate Service may provide help if you qualify.

Report Any Misconduct

If at any point you feel an IRS agent is abusing their power, overstepping their bounds, or otherwise acting inappropriately, speak up. Report the misconduct through the proper channels.

You can file a complaint with the Treasury Inspector General for Tax Administration (TIGTA). They investigate abuses like harassment, bribery, theft, or unauthorized access of private information. The IRS Office of Professional Responsibility also reviews agent misconduct.

When reporting improper behavior, provide as much documentation as possible. Keep a detailed timeline of events, including dates, names, and specifics of what happened. The more evidence you have, the more likely a complaint will be properly addressed.

Understand the Power Imbalance

Dealing with the IRS involves an inherent power imbalance. The IRS has authority to garnish wages, seize property, and impose legal consequences. You have fewer resources and options.

This doesn’t mean you are powerless. Through education and perseverance, you can assert your rights. But you may need help evening the playing field. Consider:

• Getting legal counsel or a tax professional to support you.
• Asking the Taxpayer Advocate Service for assistance.
• Contacting elected officials if you face excessive collection actions.
• Filing appeals if you disagree with IRS findings.

The IRS must follow the law even if they have more leverage. With the right help and knowledge, you can overcome the power imbalance.

Pursue All Administrative Options First

If you disagree with an IRS finding or ruling, take advantage of all administrative options before going to court. The IRS appeals process and Taxpayer Advocate Service may resolve issues without litigation. Potential options include:

• Request an Appeals conference to review your case.
• Submit an Offer in Compromise to settle tax debts.
• Seek assistance from the Taxpayer Advocate if facing hardship.
• Petition for audit reconsideration if you have new information.

Administrative resolutions tend to be faster and less expensive than court. And they reduce opportunities for IRS agents to overreach their authority compared to legal settings.

Choose Your Battles Wisely

Not every perceived injustice is worth fighting. Consider the time, money, and emotional toll of challenging the IRS. Weigh the risks and benefits before pushing back too hard. Ask yourself:

• Are the dollars in dispute worth the fight?
• Is the principle important enough to pursue?
• What are the chances of prevailing if I challenge it?
• What IRS concessions or settlement could I reasonably obtain?

Fighting the IRS can quickly consume your life. Make sure it’s worth the battle. Seek advice from tax professionals to identify which issues are most important to address.

Document Everything

The more records you have, the stronger your case if disputes arise. Thoroughly document all aspects of an investigation, including:

• Saving all letters, notices, and emails from the IRS.
• Recording dates, times, and attendees for every conversation and interview.
• Compiling audio or video recordings if allowed.
• Keeping detailed notes of every interaction.
• Following up in writing to confirm next steps discussed.

Create a timeline of events and add to it continuously throughout the process. Documentation protects you if anything is misrepresented or forgotten.

Remain Professional

It’s natural to get emotional when your finances and livelihood are on the line. But remaining courteous and professional helps your case. Avoid:

• Losing your temper or yelling at IRS personnel.
• Making snide or sarcastic comments.
• Refusing to communicate or participate at all.
• Threatening legal action or complaints too quickly.

You can firmly stand up for yourself without being hostile or belligerent. Being professional puts you in a stronger position down the road.

Conclusion

Dealing with IRS inquiries involves many potential pitfalls. But knowledge of your rights goes a long way. Seek professional assistance whenever needed. Document events, report misconduct, and remain courteous. With the right safeguards, you can avoid most IRS abuses of power and protect yourself.

What strategies have you used to handle IRS issues successfully? Share your experiences in the comments below!

References

• Office of Promoter Investigations At-a-Glance – Overview of the IRS office that investigates abusive tax promotions and preparers.
• IRS Stops Processing New ERC Claims – The IRS halted processing new Employee Retention Credit claims due to widespread potential fraud and abuse.
• IRS Abusive Transactions Process – Internal Revenue Manual section on referring and investigating potential abusive tax promotions.
• Abusive Tax Shelters and Transactions – IRS efforts to identify and stop participation in abusive tax avoidance schemes.
• IRS Criminal Investigation Areas – Program areas for IRS Criminal Investigation division including abusive preparer investigations.