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November 25, 2013


Tax Audits and Timelines: High-Asset Taxpayers Face New Deadlines

Tax audits are one of our most frequent themes in this blog. Most recently, in a two-part post on October 29 and November 4, we discussed how errors by the IRS in scanning and cataloging documents from taxpayers have affected the correspondence audit process.

In this post, let’s look at another IRS action that will surely affect many tax audits

The action we are referring to is the new policy announced by the IRS about deadlines for document delivery and other information from high-asset taxpayers during audits.

To be sure, the new policy does not apply to everyone. Taxpayers whose assets are under $10 million will not be affected.

But for wealthy people and businesses with assets over that amount, the change in the audit process is likely to be significant.

In the past, there are not been strict guidelines about timelines for turning over information to the IRS or submitting to interviews by IRS agents.

The IRS recently announced, however, that specific deadlines will be in place next year for taxpayers whose assets exceed the $10 million threshold.

Initial requests by the IRS for information will still be handled in a flexible way, without strict guidelines.

But the new policy will impose a new, stricter timeline for complying with such requests. If the original, flexible deadline is not met, taxpayers will have 49 more days to comply. The clock will start ticking on the 49 days as soon as the original deadline is not met.

The new policy calls for two warnings to be issued by the IRS during the 49-day period. And if the taxpayer has still not complied, the IRS intends to move forward with a summons for the information it seeks.

Source: Reuters, “Hand over tax audit information, clock is running: IRS,” Patrick Temple-West, Nov. 22, 2013