Practical Insights for Business Owners
Client Q&A: The IRS is After Me. What Should I do?
The IRS is after me. What should I do?
The IRS contacts people in many ways, and for many reasons. Most of these contacts are routine inquiries; some are not. What follows are some considerations to help you understand the process. However, if the IRS contacts you, seek advice from a qualified tax attorney or accountant.
Is the IRS Really After Me?
Many people (including me) have recently received robocalls stating that the IRS is about to sue you, unless you call (and provide confidential data). These calls are phone fraud, a telephone version of phishing on the internet, and have nothing to do with the IRS. The IRS does not robocall and threaten. If you receive such a call, do not call back – ignore it.
How Does the IRS Contact Me?
Typically, the IRS makes initial contact by a letter in the mail, not email or social media. The IRS will write, for instance, if the income on your return doesn't match your W-2s and 1099s in their data base; if they've found mathematical mistakes on your returns; if their account of your estimated tax or withholding tax payments doesn't agree with yours; if they are going to send you a refund; if they have selected you for audit; or for a hundred other reasons. While an IRS contact is no reason to panic, do not ignore it.
If you ignore IRS letters, they will follow up with harsher letters or phone calls. Ignoring letters and live phone calls can make an easy matter worse. Check your records and your returns: if there is a substantial discrepancy, you should seek advice before responding to the IRS.
What Kind of Letter Should I Worry About?
Many people know or suspect that their tax returns have errors, some serious. Examples include (but are not limited to) unreported cash income, off-the-books employment, mixing personal and business expenses, overstating gifts to charity, false records created to support tax returns, etc. If the IRS sends an audit notice where these problems exist, or asks for returns you have not filed, these can be serious matters.
If you receive an IRS contact where a potentially serious problem exists, you should contact qualified criminal counsel for prompt advice before responding to the IRS.
Should I Call My Tax Preparer?
It depends. If you have a serious problem, the IRS will seek to identify the problem (for example, unreported income), and then to determine who was at fault: for example, did the taxpayer hide information from the preparer? Did the taxpayer tell the preparer about it, and the preparer missed it or said "It's cash – don’t report it?" In either case, the preparer has a conflict of interest and you should certainly seek other representation.
Can I Have a Confidential Talk With My Accountant?
No. The IRS or a prosecutor can ask your accountant about all conversations with you, and she must answer unless she invokes the Fifth Amendment. Conversations with an attorney are generally protected by the attorney-client privilege.
If the IRS contacts you, seek advice from a qualified tax attorney or accountant. We are experienced in dealing with the IRS, including on criminal issues. We would be pleased to discuss the specifics of your situation with you.