Tip # 4: Control and Advise The Client

In an eggshell audit, controlling the client is of paramount importance and can mean the difference between whether the audit remains civil or is referred to CI. However, I would be naïve if I didn’t acknowledge that this is easier said than done.

a. During the audit, the practitioner should limit the contact between the agent and the client.

As a general rule, your client should not speak with the revenue agent. This is good practice even if there is no criminal potential. In the event that your client is contacted by the revenue agent, he should be instructed to tell the revenue agent that he has representation.

It should go without saying that if speaking to the revenue agent is a bad idea, that speaking to any person who identifies himself as a special agent is forbidden. Many educated people believe they can “talk their way” out of a criminal case. We see this time and time again. Look no farther than the yacht scene from Martin Scorsese’s “The Wolf of Wall Street,” the crime epic of the twenty-first century. There, not only did Jordan Belfort unsuccessfully attempt to talk his way out of a battery of white-collar crimes but he created new ones when he attempted to bribe the FBI agent.

Needless to say, it is rare for a client to successfully talk his way out of a “jam” when the very people who he is speaking to – i.e., special agents and revenue agents – are hell bent on a fraud referral. Remind your client that everything he says can be used against him. And to the extent that what he says is found to be less than truthful, he can expect additional charges.

To prevent the impulse to speak to a revenue agent or special agent, it is often helpful to inform your client that special agents cannot draw an adverse inference from a taxpayer’s silence. In fact, they expect silence, especially if the taxpayer is represented by an attorney.

b. What to do if the agent demands an interview with your client.

If the agent demands an interview with your client, he has two choices: he can either accept or decline. In other words, he need not “cooperate.” Your initial gut reaction will often supply the answer. As a wise criminal defense attorney once said, “Putting your client on the stand is like putting an infant in the middle of the Long Island Expressway at rush hour.”

To the extent that you have reservations and advise your client to remain silent, your client can assert his Fifth Amendment privilege against self-incrimination.

However, if you feel that it would be in your client’s best interest to cooperate, then he must be prepared to answer questions both openly and honestly. It should go without saying that you must be present. Indeed, allowing your client to be interviewed by an IRS revenue agent all by himself would be the equivalent of a shepherd allowing his sheep to be led off for slaughter. The reason why you must be present is so that you can assert the Fifth Amendment or other applicable privileges when appropriate.

The importance of your client’s answers being honest and forthcoming cannot be overstated. Indeed, false information could result in obstruction charges in addition to any criminal tax charges.

c. All Requests For Information Should Be Made Through The Practitioner.

Out of an abundance of caution, ask that the agent make all requests for information through you. In fact, you should go even one step further and ask the agent to make all requests in writing so there is no confusion about what the request was.

d. Advise Your Client Never to Tamper with Evidence or Talk With Witnesses.

Tell your client, in no uncertain terms, not to tamper with any evidence. If he backdates documents, attempts to create favorable evidence, or tries to influence witnesses, he will only make the government’s case easier to prove. In addition to obstruction of justice charges, the government can use a taxpayer’s attempts to tamper with evidence to prove willfulness in a criminal tax prosecution.

You should also caution your client against discussing his tax problems with third parties. Any third party, including a spouse, can become a witness for the government. In many instances, third parties who have been contacted by the IRS are quick to reach out for the taxpayer to tell him about that contact. Instruct your client to refer these individuals directly to you.

Next:  Tip #5: Conduct a Shadow Investigation

In accordance with Circular 230 Disclosure