“How bad could a dispute with the IRS really be?”
We’ve heard this sentiment expressed before, and if you have had the misfortune of dealing with the IRS in the past, you know that the answer is unfortunately “pretty darn bad!” The IRS is bent on collecting every single penny that they are owed, and they will resort to some pretty tough tactics in order to achieve this goal.
A recent article on AccountingWeb.com explains:
The IRS has a lot of weapons in its arsenal and it’s not afraid to use them. Lately, it’s been bringing out one of its big guns: an “administrative summons” that compels taxpayers to hand over the books and other sensitive documents where they may have been hiding their dirty secrets.
But some taxpayers have been mounting a defense. According to a new report from the Taxpayer Advocate Service (TAS) – an independent organization that assists taxpayers and “operates behind enemy lines” within the IRS itself – the number of legal disputes arising from administrative summonses reached 132 in 2011, up 300 percent from forty-four in 2005, just six years earlier. This made the challenges to a summons the most litigated issue the IRS encountered last year.
Briefly stated, an IRS administrative summons identifies the party whose tax liability is being investigated, and it requires that party to provide testimony or produce documents, records, or other data relevant to the investigation. The IRS doesn’t even have to answer to a higher authority when it wants to issue a summons. It simply fills out the form and delivers it to the appropriate party.
Typically, the IRS will try to ferret out information by first issuing an information document request. If a taxpayer refuses to comply or dawdles, the agency may rely on an administrative summons. And, if the taxpayer continues to stonewall the request, the IRS can petition the Justice Department for a court order enforcing the summons. Uncooperative taxpayers may be assessed sanctions for criminal or civil contempt.
Increasingly, IRS agents have shown a willingness to fire off a summons in the early stages of an investigation, especially when huge sums of money are at stake. Like practically every other entity, the federal government is starved for revenue to fill its coffers, so the more it can bring in, the faster the better. Furthermore, the IRS now has the ability to demand more types of documents relating to potentially abusive tax practices.
If this sounds like a nightmare to you… it is. Very few business owners can afford to spend hours digging through their records in order to satisfy the IRS. At the same time, simply ignoring their demands is a recipe for disaster. Before you know it, you’ll have an agent banging on your door or harassing you with phone calls 24/7.
So what’s a business owner to do? Simple – refuse to deal directly with the IRS. If you’re facing a tax dispute, pick up the phone and call Polston Tax today!