I am a huge fan of the Taxpayer Advocate service. This is the emergency “go to” that people who can’t afford proper representation can reach out to, and maybe get some assistance. Personally, I believe it’s a valuable resource for both taxpayers and representatives.
The “grand poopa” of Taxpayer Advocates is the National Taxpayer Advocate, Nina Olson. Mrs. Olson oversees this entire branch of the Internal Revenue Service, and she recently made some comments that, in my opinion, appear to be completely inaccurate.
Mrs. Olson questioned the effectiveness of correspondence exams in comparison with face to face audits. She stated in a blog, this past Tuesday, that “…taxpayers were almost three times more likely to respond to and participate in a face to face audit than one conducted by correspondence.” As an example, she cited earned income tax credit audits. She points out that correspondence audits have gone up four times as much as face to face audits over the past 10 years. She then points to a “survey of taxpayers” where the “IRS found that they expressed far greater satisfaction with face to face audits as opposed to correspondence exams, at a rate of 71% to 43%.”
OK. First, with respect to the “survey.” I don’t know one person who has had both a face to face audit and a correspondence audit. I am fascinated in the sample of people used for this survey (i.e., Wesley Snipes and Willy Nelson?).
Second. For the record, a taxpayer has to be absolutely nuts to prefer a face to face IRS examination over a correspondence exam. Why? I don’t have enough space on my server frankly, but let’s discuss three:
One. No visit to your home! They can’t see your new kitchen in a face to face interview. They are not examining your lifestyle, because they can’t! The correspondence audit is probably coming out of Cincinnati, which is a far cry from home! It’s a paper audit!
Two. No taxpayer interviews! No intrusive questions! We don’t have an examiner jotting notes down about your demeanor, why you hesitated, or were sweating, or who knows what else they jot down in their little notepad. You don’t have to be put on the spot!
Three. No requests for copies of tax returns for the year preceding or following the year under examination. This is how the IRS expands the scope of their examinations to include other years. They ask you for a copy of the return (the one you already filed, and they have – it’s just buried someplace too deep for the IRS agent to look), and then they look at it and decide if you are being examined for multiple years, as opposed to just one.
That is just three. I believe Mrs. Olsen is commenting on the fact that people tend to ignore correspondence audits, and therefore the IRS has no choice but to make assessments based upon the information they have, coupled with the answers they were NEVER provided as a result of the examined taxpayer not responding. This obviously is less likely to happen when the examiner is knocking at the taxpayer’s door.
But nonetheless, the message to the IRS to ramp up face to face examinations as opposed to correspondence exams is nothing short of a fiscal disaster to taxpayers. Bad message!
So my advice to any reader out there is, correspondence audits are many, many times better than face to face audits, despite what the National Taxpayer Advocate says, and for Goodness’ sake, simply respond to them when and if you ever get one.