Ethics I

[WhiteOleander]

Well, I guiess my point has to do with the scope of the original audit. It is my understanding (and please correct me if I'm wrong) that at the audit you only have to address the issues that are named in the letter.

For instance, if the audit letter states they want to audit say, employee business expenses, they cannot ask questions relating to Sch E rental income without giving the T/P time to get ready for that audit.

So, if the agent asked for the 2003 return, I might want to ascertain if it had any relationship to the current items being audited. If not, perhaps we need to find out the scope of the new audit so that we can prepare for that.

That's why I said I might ask the agent why the other return was being requested.

[Bees Knees]

Section 7605(b) says IRS can only examine your records once, unless they provide written notification that there is a reason why additional inspection is necessary.

Some have taken the view that since IRS already has the tax return, it is unreasonable to ask for it again without a reason. The only reason the auditor is asking for the return is because he or she is either too lazy to pull it out of their own files, or they are trying to set the tone and intimidate the taxpayer. The purpose of Section 7605 is to prevent IRS from subjecting the taxpayer to unnecessary examination or investigations.

[jainen]

IRS holds all the cards

>>The purpose of Section 7605 is to prevent IRS from subjecting the taxpayer to unnecessary examination or investigations.<<

So what? That's the general rule for all auditors and all auditees. It has NOTHING to do with your specific client. What are your going to do, sue the IRS to not get something they already have? Heck, you'd have to produce the return anyway, as evidence!

The purpose of the EA's services is to steer the client safely through the audit, however subjective the hazards may be. Standing on principle and quoting regs has its place in the game, but that place is not on the hand for which the IRS holds all the cards.

[TaxBird]

My general approach to audits is to give the auditor everything they request...and how. Summarized information accompanied by the pile/piles of data seems to work best. A polite and helpful demeanor also helps.

I have one now where the auditor (State) is all over the place with scope creep. He can't find *anything* so he's looking everywhere. I'm half inclined to throw him a bone...but then that *would* be unethical.

Now I will say, I/we are in this situation because the client behaved badly on first approach. The State has been requesting a 'self audit' of selected taxpayers on sales tax and this client simply told the State that they didn't have the manpower to do it so they weren't going to do it. Now they have the auditor who, in essence, is stepping them through the self audit process and then some. The shame is, there really is nothing to hide - they're clean on sales tax. But because they decided to find their balls at the wrong time, here we are.

[Bees Knees]

Poll is officially closed

Several have already posted the correct answer from Circular 230, and the poll seems to be heading towards the correct answer as well.

The correct answer is the prior year return should be turned over and turned over promptly. Circular 230, section 10.20 says, “A practitioner must, on a proper and lawful request by a duly authorized officer or employee of the Internal Revenue Service, promptly submit records or information in any matter before the Internal Revenue Service unless the practitioner believes in good faith and on reasonable grounds that the records or information are privileged.”

You would be surprised how many practitioners last night disagreed with that interpretation and said IRS first needed to state a reason for requesting the prior year returns.

[Bird Legs]

Audit

My procedure in a situation like this is to have the prior year return available. However,
if the auditor does not specifically ask to see it, I do not voluntarily give it to him.
Maybe this is an incorrect position.