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Ignoring an IRS Tax Audit

It may not be in your best interest to cooperate in an audit. Maybe your bank records show larger deposits than you reported as income and you don’t want to explain. Or maybe you highly exaggerated some deductions. Here, your wisest course of action may be to skip the audit.

Introduction

Before you consider ignoring an IRS audit, consult a tax attorney. Seeking professional advice is essential when dealing with the IRS. These matters represent very real financial threats and knowing how to handle them often requires a complex understanding of tax law.

CAUTION:

If you attend the audit and nervously blurt out something, you might earn a visit from the IRS criminal investigation division.

Something stupid, like, “I guess you caught me, ha, ha,” or “I didn’t think you would find that account,” can cause auditors to stop the audit and bring in the criminal investigators.

TIP:

Even if you skip the audit, you can contest the outcome by going to tax court. By disregarding the audit notice, you keep the IRS away from your records—unless this auditor issues a summons. Once in tax court, you can contest only the items of your choosing and can stay away from the problem areas.

This strategy has its pitfalls, however, and before trying it out, check with a tax pro.

When you ignore an audit notice, the IRS will proceed in one of three ways:

Do the audit without you

The auditor may simply issue a report disallowing all items he or she thinks are questionable. A month or so later, you’ll receive a bill from the service center. You may want to accept the bill and move on with your life. The danger is that if you don’t cooperate and the IRS thinks you are hiding something, the auditor may expand the audit to other open years—returns due and filed within the past three years (six years if the auditor suspects serious misdeeds).

Call you

The auditor or his or her manager may call to ask why you are not cooperating. You can ignore the call or give a vague answer, such as, “I am giving it thought,” “I’ve had other pressing matters,” or “I’m sick.” Eventually, the auditor will issue a report based on what he or she has. As with the point just above, the auditor may disallow many of your deductions and exemptions. A month or so later, you will receive a tax bill.

Issue a summons

The IRS may use a summons to get information from you. The IRS can use that same power to order you to appear at an audit. If you ignore a summons, you could be held in contempt of court—even jailed. If you receive an IRS summons, talk to a tax pro.

Bishop Toups

Bishop L. Toups is an estate planning, elder law, and tax attorney in Southwest Florida. He helps clients with their various estate planning needs and helps clients navigate the Medicaid system here in Florida. He also represents clients nationwide and worldwide in front of the IRS. Bishop is also a V.A. accredited attorney and helps Veterans obtain benefits from the Department of Veterans Affairs.