What is an effective tax defense in an IRS eggshell tax audit?

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• published: 18 Jan 2016
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http://klasing-associates.com/ Call Los Angeles tax attorney David Klasing today at 800-681-1295 for a reduced rate consultation In the typical eggshell audit criminal tax defense counsel seeks to; avert the emergence of a criminal investigation, by attempting to prevent a client from making any criminal admissions. In a reverse IRS eggshell audit, they endeavor to1. The Revenue Agent does not consider the misstatements found and adjustments made during the audit to be caused by fraud and thus do not discover criminal tax issues;1. The Revenue Agent does not consider the misstatements found and adjustments made during the audit to be caused by fraud and thus do not discover criminal tax issues; 2. The Revenue Agent discovers misstatements that they suspect might have been caused by fraud but because of effective lawyering the agent is inclined to keep the matter purely a civil examination because of lack of proof as to criminal intent; 3. The Revenue Agent makes a referral to a technical fraud specialist so that the case will be possibly worked up for a referral to the Criminal Investigation function of the IRS (CI) for prosecution.Taxpayers facing an egg shell audit should only be represented by experienced criminal tax defense counsel and the CPAs who perform via a Kovel agreement (United States v. Kovel, 296 F.2d 918 (2nd Cir. 1961)) effectively subordinating them to the attorneys supervision and rendering communication between the CPA and the client subject to the attorney client privilege. The original return preparer should never provide representation in an egg shell audit as theyTaxpayers faced with an eggshell audit are in dire need of an experienced criminal tax defense attorney who is able to advise the taxpayer on how exactly to comply with the auditor’s data requests, The Criminal Tax Defense Attorney’s largest concern in an eggshell audit isOnce a revenue agent discovers significant and affirmative indications of fraud during a civil audit, he will first privately consult with his manager and upon receiving his managers approval he then secretly consults with a “fraud referral specialist” that works directly with the auditor to develop a “fraud development plan,” for the sole purpose of documenting the affirmative acts and firm indicators of fraud in order to refer the case to the criminal investigation function of the IRS. Criminal tax defense counsel must know how to weigh the benefit of continuing to cooperate with the civil revenue agent in an effort to quell the agent’s suspicion before a referral is made or choosing to advise his client to remain silent to protect the taxpayer from self-incriminating themselves by admitting to tax fraud or in making statements that the auditor later proves to be lies which amounts to a felony in and of itself as it is a felony to lie to a federal agent after a referral has been made.Questioning the auditor regarding whether there is an open criminal investigation, grand jury investigation, associated technical fraud advisor or associated special agent of the criminal investigation division achieves different objectives in an eggshell versus a reverse eggshell audit. In an egg shell audit, this line of questioning may become necessary to protect the taxpayer but must be asked in such a manner as not to raise the auditor’s suspicion that tax fraud exists in the client’s fact pattern. I If a reverse eggshell audit is underway, this line of questioning can help protect the taxpayer, because it will alert counsel to the existence of a clandestine criminal investigation or, If the revenue agent provides more than a tacit denial of the existence of a parallel criminal investigation, subsequent information and statements may be suppressible under Tweel.One of the strongest protections available to criminal tax defense counsel is found under Tweel, which held that any auditor deception in a reverse egg shell audit has to be tacit rather than affirmative otherwise subsequently procured information will be suppressible. Thus when a revenue agent lies when he or she states that there is no parallel criminal investigation underway, a technical fraud advisor has not been associated with the audit, or if they continue their civil investigation after badges of fraud have been detected which are sufficient to trigger a halt to the civil examination and a criminal referral, any subsequently procured documents and statements are suppressible in a subsequent criminal prosecution.