April 01, 2016

Defending IRS Robo-Audits

Rick Yandle

Reprinted from the March/April 2016 News Briefs of the Group Legal Services Association.

Before becoming a lawyer, I spent the first half of my tax career as a preparer. Responding to IRS notices was an inevitable part of the process. The most frustrating were what I referred to as “robo-audits,” and their ugly cousins the “zombie audits.” Working those could be maddeningly inefficient if you didn’t know the ropes, and could become black holes of lost time and resources if you let them.

Fast forward a few decades; my law practice now centers on tax controversy. My hair is thinner and grayer, but robo-audits and zombie audits are now powerless to waste my or my clients’ time.

At the GLSA 2016 Spring Conference in May, I will be leading a session discussion on “Defending IRS Rob-Audits.” The key is not just defending, but doing so efficiently. We will walk through the IRS’s heavy robo-hitter, the Automated Under-Reporter (“AUR”) unit, and the Automated Under-Reporter notice. We will discuss what is, and is not, a reasonable expectation of resolution within the unit itself, and the “5½ bites at the apple” appeals plan. (6 bites, but one rarely succeeds so we count it as a ½ bite and move on).

We will also discuss the sometimes more frustrating “correspondence examination.” Despite appearances, correspondence exams are assigned NOT to a single examiner. The name on the letter is the center manager’s name. A different correspondence exam technician will be working the case each time it is picked up. The IRS correspondence examination unit is underfunded (at about 2009 funding levels) and understaffed. Workload-wise they are drinking from a firehose, and the taxpayer experience can reflect that. Many submissions and responses are never worked. It is easy to get drawn into a time hogging cycle of repetitive submissions and phone calls and “. . . but I sent you all that(s).” We will lay out what is, and is not, a reasonable expectation of resolution with correspondence exam unit, and the “5½ bites at the (settlement) apple.”

We will also discuss the IRS’s cut-to-the-chase “it’s just a math error, here’s your bill” notice. Sometimes a math error is just a math error, but other times is a robo-adjustment cloaked as a math error “correction.” It’s hard to appeal a math error correction directly—what do you do? You rotate the apple. The 5½ appeal rights and settlement opportunities are still there, you just have to go about it differently—we will discuss how.

If your practice includes IRS notices, I encourage you to attend “Defending IRS Robo-Audits.”

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Rick Yandle

Rick Yandle is an attorney and Group Legal Services Association member.