The Risk Manager, Winter 2005
The Internal Revenue Service has announced that it is going to return to more vigorous tax enforcement than in recent years. This means that lawyers should see an increase in clients seeking help with IRS problems – good for business maybe, but if you are inexperienced or rusty on tax disputes, the risk of a malpractice claim is significant. Theodore M. David’s article “Ten Things Every Lawyer Should Know About The IRS” in the December 2004 issue of the ALI-ABA Practical Lawyer could be just what you need to be sure you have a good grasp of the basics of representing a client in a dispute with the IRS.
In identifying ten key areas of IRS tax dispute practice, David provides a structure for reviewing your current understanding of the IRS dispute process and for preparing and explaining to a client the course of action you propose to take. David recommends that at the inception of a tax dispute representation lawyers have clients complete IRS Form 2848, Power of Attorney. This permits lawyers to represent clients at all levels of the IRS appeals system and subjects them to the IRS Rules of Conduct. A letter of engagement should be executed clearly describing exactly what the scope of the representation is and is not.
The ten areas David identifies with a brief synopsis are:
- Examination: A brief explanation of which returns are selected for audit and how the IRS processes them.
- Statute of Limitations: A useful recap of time limits for filing protests of IRS administrative rulings, time limitations on additional IRS tax assessments, time limitations on IRS collection actions, the time period for claiming refunds, and the criminal statute of limitations.
- Summonses: Explains how the IRS uses the summons process for discovery and how the process works with some thoughts for the taxpayer’s counsel.
- IRS Appeals Branch: Describes the operations of the IRS in administratively resolving tax disputes. Covers administrative appeals procedure and Branch settlement techniques.
- Collection: An overview of the procedures the IRS uses for collection, compromise, and levy of assets.
- Criminal Actions: A brief description of the deterrence motive of the IRS criminal tax system and comment on the defense of a criminal tax case.
- Tax Court: An overview of the tax court system.
- Claims: Describes the separate appeals system consisting of both administrative and court procedures for clients seeking refund of paid taxes.
- Penalties and Interest: An overview of how penalties and interest are calculated and applied.
- Obtaining Information from the IRS: Identifies sources of law and regulation on IRS dispute resolution.
“Ten Things Every Lawyer Should Know About The IRS” is worthwhile reading for lawyers representing clients in tax disputes with the IRS. The good news is that it is available online for $15. Go to Publications, The Practical Lawyer December 2004 issue, and the rest is easy.