Taxation & Estate Planning

Knock, knock ? the IRS is at my door ? how should I handle it?

By howardlevy

I received a call this week from a small businessman in Cincinnati who had an IRS Revenue Officer sitting in his living room.  Technically, he did not have to let the Revenue Officer in his house, but he did.  I am glad he called me. 

My client handled the situation correctly – professional, courteous and honest.  This was the Revenue Officer’s first impression – and when your head is in the mouth of the bear, it is important to say nice bear. 

A polite “I will get answers to your questions and help you do your job, but I would like to consult an atttorney first” is a good way to handle these uncomfortable situations.

When the Revenue Officer started asking financial questions – where do you bank? who owes you money? how much can you pay the IRS back every month? – my client stopped and called me.  The desire to please the Revenue Officer conflicted with an inner message of caution.

An IRS Revenue Officer needs your  financial information and is entitled to it.  And asking for it on the spot is the best way for them to get it without delay.  But disclosure on the spot – off the top of your head - can result in providing information that is both incorrect and harmful to your case.  Presenting your financial information in the best light possible is too important not to take time to think it through and do it right without pressure.

I knew the Revenue Officer in this case, and spoke to him on the phone while he was at my client’s house.  Later that day, I provided him a power of attorney authorizing my representation.  I requested and was granted 14 days to provide the financial information he was seeking. 

Incidentally, my client had a large account receivable at the time of the Revenue Officer’s visit.  The time permitted us to prepare an accurate financial statement, but also allowed my client to legitimately collect the receivable first and solve his discomfort with disclosing the source of payment.

Handle unannounced IRS visits with respect, but always keep in mind your rights to representation before disclosure.

Full post as published by IRS and the Law on February 14, 2010 (boomark / email).