Changing the IRS Audit LocationGreta P. Hicks
February 11, 2013 — 4,461 views
One of the first issues to negotiate with an Internal Revenue Service (IRS) auditor is the time and place of the audit. If it is a field audit, the auditor will press to go to the taxpayer’s place of business. In a correspondence audit, the auditor will most likely want to complete the audit by mail even if you request that it be transferred to a local office. Below are code, regulations and Internal Revenue Manual (IRM) references that will be helpful when negotiating the location of the audit or attempting the transfer of an audit. Who determines the location of the audit? The time and place of audit pursuant to the provisions of Code Sections 6420(e)(2), 6421(g)(2), and 6427(j)(2) are to be fixed by an officer or employee of the IRS, but Code Sec. 7605 and related regulations admonishes employees to schedule a time and place that is reasonable under the circumstances.
What about scheduling audits during the filing season? The IRS website states: “… it is reasonable for the IRS to schedule audits throughout the year, without regard to seasonal fluctuations in the businesses of particular taxpayers or their representatives. However, the IRS will work with taxpayers or their representatives to try to minimize any adverse effects in scheduling the date and time of an audit.”
Once the audit location is set, can the location of audit be changed? Yes. Is it easy for the location to be changed? Sometimes. Treasury Regulations 301.7605 – 1 and 301.7605-1(e) are the legal references for setting the time and place of the audit, and for requesting a change of place of audit.
Can a correspondence audit be changed to an office or field audit? Yes, but it may take some strong negotiations on the part of the representative. The IRS website states: “If the audit is by correspondence, you can request a face-to-face audit because the books and records may be too voluminous to mail” but it gives no legal reference for this statement.
On April 1, 2011, an article in The Tax Adviser stated: “If an assessment in a CP 2000 notice is incorrect or if a response is to be made to the initial contact letter, the practitioner should consider whether to ask that the matter be transferred from the IRS campus to a local office. The IRS tends to not want to transfer cases because of the possibility of delay and possible increased costs. Regs. 301.7605-1(e) (1) provides that the IRS will consider, on a case-by case basis, written requests to change the audit venue. Many IRS campuses take the view that correspondence audits will be transferred only in instances of hardship. If there are problems in transferring an audit, the representative may want to contact the local taxpayer advocate’s office and request assistance in having the matter transferred to the local IRS office.”
Both the Treasury Inspector General for Tax Administration (TIGTA) and the National Taxpayer Advocate have issued reports identifying problems with the conduct of correspondence audits.
Can an office audit be held at a location other than the IRS office? Yes. An office audit generally will take place at the closest IRS office within the district encompassing the taxpayer’s residence or within the district where the entity’s books, records and source documents are maintained.
Are there exceptions to the general rules regarding office audit locations? In scheduling office audits, the IRS will grant a request to hold an office audit at a location other than an IRS office in a case of clear need, such as when it would be unreasonably difficult for the taxpayer to travel to an IRS office because of the taxpayer’s advanced age or infirmed physical condition, or when the taxpayer’s books, records and source documents are too cumbersome for the taxpayer to bring to an IRS office.
What are the circumstances for approval of transferring an office audit? Again, from the IRS website: “…a request by a taxpayer to transfer the place of audit for an office audit will generally be granted if the current residence of the taxpayer or the location where the taxpayer’s books, records and source documents are maintained is closer to a different IRS office in the same area as the office where the audit has been scheduled. The IRS normally will agree to transfer the audit to
the closer IRS office.”
What if you want to change the location of a field audit? The site states: “…a request by a taxpayer to transfer the location of audit for field audits will generally be granted under the following circumstances:
• if a taxpayer does not reside at the residence where an audit has been scheduled, the IRS will agree to transfer the audit to the taxpayer’s current residence;
• if the taxpayer’s books, records and source documents of an individual sole proprietorship or a business return are maintained at a location other than the location where the audit has been scheduled, the IRS will agree to transfer the audit to the location where the taxpayer’s books and records are maintained. See IRM 126.96.36.199.3.”
What factors should be included in a request to transfer an audit? The factors include:
• the location of the taxpayer’s current residence;
• the location of the taxpayer’s current principal place of business; the location at which the taxpayer’s books, records, and source documents are maintained;
• the location at which the IRS can perform the audit most efficiently;
• the IRS resources available at the location to which the taxpayer has requested a transfer; and
• other factors indicating that conducting the audit at a particular location could pose undue inconvenience to the taxpayer.
Are there any other arguments regarding the location of field audits? According to the IRS: “…If an audit is scheduled by the IRS at the taxpayer’s place of business and the taxpayer represents to the IRS in writing that conducting the audit at the place of business would essentially require the business to close or would unduly disrupt business operations, the IRS, upon verification, will change the place of audit to an IRS office within the district where the taxpayer’s books, records and source documents are maintained.”
What are the representative’s best resources for presenting a good case for transferring an IRS audit? Since the decision to transfer or not transfer an audit is made by a local IRS employee, IRM 4.11.29, IRM 4.4.33, IRM 188.8.131.52.18, IRM 184.108.40.206.3, and IRM 220.127.116.11 should be used as resources for requesting the transfer of audits. These IRM sections plus Treasury Regs. 301.7605 – 1 are the representative’s best guidelines when making a written request for the change of an IRS audit location.
Community on TSCPA’s Website
Are you ready for tax season? To assist you, TSCPA’s Tax Issues Community on the website provides a number of resources and links to tax-related information.
In the Federal Information section of the community, you’ll find links to IRS documents, directories and tax articles, as well as links to other publications, articles and tax-related issues. In the Online Resources section of the community, you can access:
• Forms and publications;
• Information on electronic filing;
• Businesses getting started;
• IRS contact lists;
• Facts about abusive ta x scams and schemes;
• A learning center;
• Other non-IRS online resources.
Greta P. Hicks
Greta P. Hicks, CPA, is a consultant on IRS problems, seminar discussion leader, author of continuing education courses and web content provider. She can be reached at [email protected] or www.gretahicks.com.