Tax controversy is a term that involves a contested matter with the Internal Revenue Service. The matter can be a civil or criminal matter and administrative or judicial. When dealing with the IRS there are a few truths, one being that CPAs are adept at preparing tax returns and are trained in auditing a company or business's financial statements with an eye toward benefitting the business owners. But if you are a taxpayer involved in a tax controversy you need qualified representation from a tax attorney.
A recent case in point; a CPA tried to represent a taxpayer with a voluntary disclosure in the OVDP program that deals with foreign or offshore financial accounts. The OVDP program is designed to help taxpayers avoid criminal charges related to offshore accounts and come into compliance with the minimum amount of financial penalties. To successfully enroll in the program requires a series of steps and assurances from the IRS and its Criminal Investigation Division.
The CPA failed to gain assurances from the IRS that it would not prosecute and the end result was far greater penalties to the taxpayer after the IRS extensively interviewed him with the CPAs authorization. The IRS can review a taxpayers records and bookkeeping and even survey the taxpayer's place of business at a reasonable time. The IRS is not, however entitled to interview the taxpayer if he or she is represented by counsel.
Taxpayers tend to be overly talkative with IRS agents leading to even further complications and penalties all in an effort to explain their innocence often with the opposite results. A tax attorney will never allow an IRS agent to interview a client without controlling the conditions of the conversation and ensuring the client will not cause further harm to his or her case. And just because someone is an attorney does not mean they are qualified to represent you before the IRS in a tax controversy.
There are a number of tax controversies that require a qualified tax lawyer when going before the IRS, including complex examinations, any matter that could include criminal prosecution, innocent spouse cases, asset forfeiture and any OVDP voluntary disclosure matter, among others. Who represents you in your tax controversy with the IRS will make a difference in the outcome of your case and the amount of penalties you may end up paying.
Source: Forbes, "Representation Before the IRS," Stephen J. Dunn, Jan. 9, 2013
I am a Minneapolis, Minnesota, tax attorney representing clients in tax controversies, including IRS settlements and tax litigation matters.