7a. IRS Audit Experience
Date: Tue Feb 5, 2008 4:51 pm ((PST))I recently was picked for an IRS compliance audit (Las Vegas office,
2006, Form 1040). Big honor, huh?Among the (many) items the agent has asked to see are gambling records,
including my gambling diary, W2-G forms, casino win/loss statements,
markers, casino checks, etc.I have read a lot of general suggestions and interpretations of tax law
and regulations here in the past. Has anyone had actual first-hand IRS
audit experience that they are willing to share, here or privately?
Thanks!
I was audited ages ago, and not for gambling-related issues, but one thing I remember is that the first person you interview with is low-level (of course), and that after your meeting with them, they give you a "finding" or something that says what they've decided -- and then you can request a second meeting with a higher-up who has more power to negotiate deals, etc.
At the time I was young, was reading a lot about taxes so had a little knowledge of my own case, and I felt comfortable pressing my case on my own -- and it wasn't much money at stake, at least not from the IRS's perspective. Today I haven't kept up on the regs and case law as much, and I can't think of a situation where I'd feel very comfortable representing myself thru the process, although I might give it a try at the first level.
However, you can be fairly certain that at the first level, all your arguments will fall on deaf ears, and you will be told you owe the maximum they think they can justify. After all, just like it didn't hurt you to try to take all those deductions, it doesn't hurt that low-level employee to try to get the max tax out of you.
I assume that this process has not changed all that much, although the details of how it works may have. I'm quite sure that during your first interview, when you finish, you can ask "what happens next?", and they'll tell you, and if you ask further "what if I don't agreee with what is proposed at that time", I expect they HAVE to tell you about the appeals, and any other options available to you.
At the time I went thru it, it was (1) initial meeting, (2) higher-level meeting, and (3) tax court.
Also, if you're afraid of criminal penalties, no matter how you may have in fact violated the law and tried to evade taxes, play dumb -- but you're going to have to pay up -- "Gee, I didn't understand that, what do I have to do to make it right?" will keep you out of jail most likely, but you'll be paying tax, interest, and penalties to avoid the criminal action.
Of course, if the audit is starting out because they think they can get hard evidence of criminal activity (intentional tax evasion), then you'd better get an attorney early in the game; you could then be in serious serious trouble - and you never know who the IRS wants to "make an example" of next.
IRS employees (and their departments) are pressured to get maximum return for the time invested, and to close cases, and therefore do not want things to drag on and on for little return. At the second level, they often want to get the case closed, and my experience was that a fairly rational argument, potentially consistent with the law, is great leverage for a compromise (I got a compromise where I paid half the challenged tax, but worded in such a way that I wouldn't get challenged for the same tax in future years -- but mine was a situation totally unrelated to gambling, so the details are of no interest here).
Finally, at some point the amount in dispute starts to generate (as I understand it) more interest or penalties, and at that point, you may want to pay up while you continue your appeals; if you win in the end, you'll get it back.
-BG
···
==============