Tip #7: Dealing With the Agent
Who Should Handle the Exam?
i. The Problem: Many accountants and enrolled agents are comfortable handling examinations and tax controversies. However, when an examination involves overtones of fraudulent or false statements, it is recommended that an attorney handle the examination.
ii. The Choices: There are several different methods for handling sensitive examinations:
1. The return preparer can appear and represent the client in the examination;
2. A new return preparer who specializes in tax controversies can take over;
3. An attorney who specializes in tax controversies can appear and handle the examination; or
4. The attorney can use a return preparer to “front” the examination with the attorney in the background providing strategy and advice.
iii. Issues to Consider: Below are some issues to consider in deciding who should represent the taxpayer at the examination stage:
1. Do not compromise the return preparer’s position as a witness.
a. If the return preparer has knowledge of the problem areas, he must reveal them or invoke the tax practitioner privilege, which would highlight the problem areas.
b. If the preparer honestly does not have any knowledge of the problems and has never discussed them with the client, the return preparer is free to handle the examination without compromising the preparer’s position.
2. Do not mislead the revenue agent.
a. If the return preparer recounts facts that affirmatively mislead the examining agent, then this can be extremely dangerous.
b. If the client has made statements to the return preparer that are false or misleading and the return preparer is likely to repeat those statements, then the return preparer must not be the one to handle the examination.
3. Once the examination has begun, changing representatives in midstream may alert the revenue agent to the possible existence of fraud.
4. If the examining agent has already made serious allegations, discovered sensitive areas, or otherwise indicated that fraud is suspected, then bringing an attorney with criminal tax experience into the examination will be no surprise to the revenue agent. Rather than confirming the agent’s suspicions, the attorney often will be able to explain matters in a way that eliminates the sensitive nature of the inquiries.
5. Document requests may force your hand. If the examining agent has requested production of sensitive documents, then your client may need to invoke his Fifth Amendment act of production privilege. Or, if a summons is pending, then it is almost expected that an attorney will handle the examination from that point forward.
In accordance with Circular 230 Disclosure
As a former public defender, Michael has defended the poor, the forgotten, and the damned against a gov. that has seemingly unlimited resources to investigate and prosecute crimes. He has spent the last six years cutting his teeth on some of the most serious felony cases, obtaining favorable results for his clients. He knows what it’s like to go toe to toe with the government. In an adversarial environment that is akin to trench warfare, Michael has developed a reputation as a fearless litigator.
Michael graduated from the Thomas M. Cooley Law School. He then earned his LLM in International Tax. Michael’s unique background in tax law puts him into an elite category of criminal defense attorneys who specialize in criminal tax defense. His extensive trial experience and solid grounding in all major areas of taxation make him uniquely qualified to handle any white-collar case.
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