The US Government Accountability Office or GAO recently evaluated the IRS audit selection process, and raised several concerns about political targeting, as well as selection criteria for small businesses and self employed taxpayers.  The IRS audit selection process was found to be skewed and unfair according to the GAO report.

The GAO held 8 focus groups within the IRS, and reviewed existing IRS audit selection process criteria.  The GAO noted that the process should be “strengthened” for small business and self-employed taxpayer audit evaluation.  The IRS uses a variety of audit selection methods (more than 30) known internally as “workstreams.”  According to the GAO report, the workstreams for self-employed and small business audit selection consistently follow a general automated process to identify audit candidates, but actual selection workstreams are not consistent with one another.  Correspondence audits processes and selections may be less than the number of steps to determine a field audit candidate.

The GAO report expressed additional concerns about “internal controls” and the complete absence of any procedure, guideline or practice to determine “fairness” during the IRS audit selection process.  The GAO review found no workstream processes  “that would support its mission of treating taxpayers fairly. GAO heard different interpretations of fairness from focus group participants. Not having a clear definition of fairness can unintentionally lead to inconsistent treatment of taxpayers and create doubts as to how fairly IRS administers the tax law.”  The GAO noted that the lack of controls and guidelines “increases the risk that the audit program’s mission of fair and equitable application of the tax laws will not be achieved.”

The GAO made several recommendations to improve the IRS audit selection process, and to strengthen workstreams and process guidelines as they relate to small business and the self-employed.  If you have been selected for an IRS audit, it is important for you to learn as much as possible about the process of an IRS audit, and the genuine financial risks you face as a taxpayer.  Never speak with the IRS directly.  If you have been notified of an IRS audit selection, we invite you to contact us for a free and substantive consultation at 866-631-3470.


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To set up a free, no-obligation consultation with one of our knowledgeable San Diego based estate planning, business and tax lawyers, or learn more about our tax preparation, accounting and business advisory services call us at 866-631-3470 or contact us.