Finding the Winning Strategy For Your IRS Audit

July 5th, 2021 at 10:04 AM

If you are undergoing or about to be audited by the IRS audit, you should know how your tax positions stack up against the IRS examiners’ positions.

In most cases, you are discussing the facts, not the law, and you prove your facts with receipts, canceled checks, and logbooks.

Once you get into the law, the rules of engagement work pretty much as I describe below.

Here are three general rules on the persuasiveness of tax documents:

Your tax dispute always begins with the IRS.

At the earliest stages of the audit, you work with auditors and agents whose knowledge of the law comes primarily (or solely) from IRS documents, not statutes or court cases. As you advance your case within the IRS, you deal with supervisors and officers who are more knowledgeable and pay more attention to the code, regulations, and (to a lesser extent) court cases.

Throughout the audit, one thing remains constant: IRS documents remain hugely important at all levels within the IRS.

After the tax code and regulations, the first type of official IRS publication is a revenue ruling. The revenue ruling reads like a condensed court case and describes how the IRS applies the law to a particular set of facts.

The second type of official publication is the revenue procedure. The IRS uses the revenue procedure to administer the law by updating dollar amounts for inflation and by explaining procedures for making elections or filing forms.

The third type of official publication is the acquiescence or non-acquiescence. At its discretion, the IRS can issue a statement indicating its agreement (acquiescence) or disagreement (non-acquiescence) with a Tax Court ruling.

Last, you’ll find notices and announcements that describe the IRS’s official position on recent issues. You’ll also find private letter rulings and technical advice memoranda that carry weight with the IRS.

The IRS also publishes IRS forms, instructions, publications, and FAQs (guides). The guides are less technical than official pronouncements, and they don’t include citations. The IRS writes the guides in clear terms so that non-professionals can easily understand them.

Most tax disputes begin and end with the IRS. So where do court cases fit into your legal research?

Once your tax dispute leaves the IRS and enters court, your best sources of tax authority are statutes, regulations, and prior court cases.

Mark S. Fineberg, CPA

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