Although Tel-Law information is periodically reviewed, it is important for you to realize that changes may occur in this area of law. This information is not intended to be legal advice regarding your particular problem, and it is not intended to replace the work of an attorney.

If you do not have an attorney, the Oregon State Bar Lawyer Referral Service can help you. Online Lawyer Referral Service information and a fill-in form is available. Or you may contact the service by phone: The number to call from the Portland area is 503-684-3763 or toll-free from anywhere else in Oregon, 1-800-452-7636.

The following information regarding an IRS audit is brought to you as a public service by the lawyers of the State of Oregon. The material presented is general legal information intended to alert you to possible legal problems and solutions.

In general, the IRS collects taxes and decides whether taxes are owed to the United States.

The following IRS mission statement describes their role and the public’s expectation about how they should perform that role:

• In the United States, the Congress passes tax laws and requires taxpayers to comply.
• The taxpayer’s role is to understand and meet his or her tax obligations.
• The IRS role is to help the large majority of compliant taxpayers with the tax law, while ensuring that the minority who are unwilling to comply pay their fair share.

To carrying out its mission, the IRS has authority to:

• receive and process tax returns;
• conduct office or field audits;
• hear administrative appeals;
• find mistakes or over-assessments;
• negotiate compromises or closing agreements;
• give opinions, rulings, and extensions;
• receive payments;
• assess and collect deficiencies;
• receive, consider and pay refund claims;
• litigate civil cases in the United States Tax Court; and
• process fraud, negligence, penalty, and criminal cases.

The IRS exercises its right to audit a return within three years from the return's due date or file date, whichever is later. This limitation does not apply when there is an allegation of fraud, when no return was filed, or when the taxpayer is charged with a substantial omission or concealment of items of gross income.

Act promptly if you are contacted by the IRS. Contact your lawyer, bookkeeper or accountant if you need professional help with IRS inquiries. If you think you are the subject of a criminal investigation, it is advisable not to speak with any IRS representative, even casually, without first getting a lawyer's advice.

The IRS contacts people either with an office audit or a field audit of tax returns. An office audit involves an inquiry into one or two items on your tax return and is conducted in the local IRS office. You must bring your books and records to the examining agent of the IRS at the IRS office. Occasionally, an office audit can be handled entirely by mail.

A field audit usually involves a more detailed examination of your books and records. In most cases, an examining agent of the IRS will come to your home or office to examine your books and records. An alternate location for the examination may be negotiated with the agent.

To determine the accuracy of your return, the IRS may examine relevant books, records, or other documents in the possession of other persons or entities such as banks, savings and loan associations, and other companies. The right of the IRS to review your records or the records kept by others is not absolute. A lawyer can advise you when to challenge the IRS demands to examine certain records and witnesses.

When the IRS completes an audit, the examining agent prepares a report proposing ways to adjust your tax return. You sign the report if the adjustments proposed in it are acceptable. If you do not agree with the agent's conclusions, you or your representative and the IRS agent may try to find a compromise. If settlement is impossible, the IRS local District Director will send you a "30-day letter." This letter notifies you of your right to appeal the proposed changes within 30 days and outlines the proposed changes to your return. The letter will explain what steps you should take, depending on which action you choose. Be sure to follow the instructions carefully.

If you do not respond to the 30-day letter or if you later do not reach an agreement with an Appeals Officer who was assigned to make an independent review of the issues in dispute on your return, the IRS will send you a 90-day letter, which is also known as a notice of deficiency. You will have 90 days from the date of the notice to file a petition with the Tax Court. Ask a lawyer about the merits of your case and the court choices that may be available.

An IRS audit may result in a Prosecution Report that may or may not recommend criminal prosecution of a taxpayer.

Willful violation of the IRS Code can result in serious criminal and civil penalties. The IRS can analyze any tax year when considering criminal prosecution and penalties. As said earlier, if you think you are or may be the subject of an IRS criminal investigation, do not speak with an IRS agent, even casually, without first getting a lawyer's advice.

The IRS offers many services to help you resolve disputes, including Fast Track Mediation and the Taxpayer Advocate Service.

For more information about the Internal Revenue Service and their services, you can visit their website: www.irs.gov

This information is from the Oregon State Bar's Tel-law service, a collection of recorded legal information messages prepared by the lawyers of Oregon. In addition to being online, the Tel-law service is accessible by telephone at 503-620-3000 or toll-free in Oregon only, 1-800-452-4776. A touch tone phone allows direct access 24 hours a day, 7 days a week. To receive a free Tel-law brochure listing the subjects available call 503-620-0222, ext. 0.