On tax audits

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I rarely write about the ‘old days’ in part because it’s many years since I wore a suit and time have moved on so I can’t be confident that my knowledge is anywhere near up to date on this topic. So this post is really a test as to how much things have – or have not – changed.

It was interesting to find this primer on representing what US professionals call ‘delinquent clients.’ It’s surprising the number of similarities I see between recommended practice in the US and what I would expect to see in the UK. Stuff like getting a percentage fee upfront, effectively making sure the client is up to date on payments and so on. There are some wrinikles in procedure as you’d expect and a slightly different approach to settlement but broadly speaking, a UK CA would feel reasonably comfortable with the US system. I felt a few things were missing:

• If we’re talking an investigation, it’s going to cost the client a minimum of x2 the annual fee or £1,000 de minimus in fees.
• Let’s get the ‘truth’ out in the open as quickly as possible. The more complete and faster the disclosure, the less work the Inspector has to do.
• Split arguments clearly between fact and application of the law. Inspectors are good at thinking they know the difference and very often they don’t.
• Don’t put up with ‘local averages’ – go with your own data points.
• Concede the small stuff, fight the bigger picture. It’s surprising how much of a shopping list you can make up that will satisfy Inspectors but be sure you know what you’re setting up for the future on agreed percentage write backs.
• Know when to pass on. Some technical arguments are genuinely fraught with risk and a second pair of eyes can be invaluable.
• Communicate every step of the way with clients, ensuring they understand in plain English what’s happening and why.

As the US article says:

Once you have helped a client resolve his or her IRS tax problem, you often have a loyal, long-term client and a great source of referrals. After all, prior to your assistance, the client felt like a criminal.

Tell me what I’ve missed or do these principles still hold true?

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