I.R.S. Controversies

If you receive a notice from the Internal Revenue Service (I.R.S.) that directs you to produce certain information or summons you to meet with an I.R.S. representative, there are two important things for you to remember. First, the I.R.S. is the collection agency for the U.S. Treasury Department and a summons from the I.R.S. does not have the force of a subpoena issued by a court of law. Second, you should consult with Charles A. Randall, P.C. and have him speak on your behalf with respect to all communications between you and the I.R.S.

You can designate Mr. Randall to serve as your representative and require that the I.R.S. send all correspondence and notices to his office and not to your home. Not only does this relieve you of a burden, but it allows Mr. Randall to make sure the I.R.S. is in full compliance with the law before any investigation or audit process begins. Further, Mr. Randall will make sure that all of your rights and privileges are preserved.

Reaching a settlement with the I.R.S. through an Offer in Compromise is discussed a lot among those who work in tax-related fields. However, there are disadvantages with an Offer in Compromise and it may be the least attractive alternative for you. It may be in your best interest to resolve your matter through Payroll Deductions, an Installment Agreement, or a Closing Agreement.

Fueled by sympathy for taxpayers, Congress passed the I.R.S. Restructuring and Reform Act of 1998. In response, the I.R.S. has taken great strides to put on a friendlier face. However, the teeth behind the smile were revealed in 2002 when the I.R.S. began using random audits for the first time since 1988.

During the 2002 fiscal year of the I.R.S., individual income tax returns were audited at a rate of 1 out of 174. Reporting small amounts of Schedule C business income raises a red flag with the I.R.S. and in 2002, taxpayers who reported an amount of Schedule C income less than $25,000 were audited at a rate of 1 out of 37. By comparison, taxpayers with $100,000 or more of Schedule C income only faced a 1 in 68 chance of being audited. Incorporating your business can reduce your chances of being audited. The 2002 audit rate for corporate income tax returns was 1 out of 103.

It is becoming increasingly difficult to negotiate settlements with the I.R.S. In 2001, the I.R.S. only accepted 31% of Offers in Compromise that were submitted and in 2002, the acceptance rate for Offers in Compromise dropped to 23%.