Federal tax agents working for the Internal Revenue Service (IRS) know how to reach people and how to catch them off-guard. They are also trained in asking leading questions about tax-related activities that, if answered flippantly, could lead to incriminating evidence. IRS agents are prepared to perform their job duties whether on the phone, through letters or during in-person interviews. In the same way, taxpayers should protect themselves by planning for how to react to and communicate strategically with these trained tax personnel.
If taxpayers being audited or otherwise investigated by the IRS are contacted by phone, it may seem difficult at first to remain silent. However, agents use this tactic to catch people off-guard and to coerce them into providing information that may hurt their case. Anyone contacted by phone should instead defer answering any questions directly and ask for the IRS agent's contact information. If a specific response is required, taxpayers should either reply in writing or state that an accountant or tax attorney will contact the agent shortly.
Keep It in Writing
When dealing with a large federal agency like the IRS, it is important to keep good records of all communications and contacts. To do this, document as many communications as possible in writing and send all correspondence by certified mail return receipt requested. Maintain a file with copies of all letters and certified mail receipts, which may prove useful. If phone conversations do occur, send a confirmation letter to the IRS agent reiterating any next steps. If possible, retain a tax professional or tax lawyer to manage all IRS interactions.
Escalate, Escalate, Escalate
If there are any breakdowns in the oral or written communications with the IRS agents on the frontlines who directly handle taxpayer audits or investigations, people should not hesitate to escalate. Even IRS agents have managers and regional managers who may prove more reasonable and cooperative in negotiating or settling tax discrepancies, back taxes or other common IRS violations. In addition, taxpayers can appeal agent decisions, which may be overruled by higher IRS officials or tax court judges assigned to the cases.
Meeting with IRS officials in person, and without legal representation, should be a last resort. Face-to-face meetings can be helpful to negotiate penalty reductions when honest mistakes were made, but they are handled best by tax attorneys with experience handling IRS violations. In particular, taxpayers or business owners should not attempt to mitigate or deal with criminal charges like tax evasion or tax fraud on their own. Because of the steep penalties and threat of incarceration, hiring a tax lawyer should not be a last resort.
If an IRS agent has recently contacted you about a tax-related matter, consult with a tax attorney before responding to the tax official. You should first discuss your situation with a tax lawyer and go over all legal options to ensure you will receive due process under the law and that you are protected from self-incrimination tactics.