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Cash payment to an IRS auditor does not make an audit go away

A chiropractor in Lowell recently pleaded guilty to charges of bribing an Internal Revenue Service auditor. According to allegations in the complaint, the man paid $5,000 in cash to an IRS auditor to sign off on an audit.

The man had hoped that the auditor would ignore two false deductions made on his 2011 and 2012 tax returns. These business deductions were actually payments to several female patients who accused the chiropractor of inappropriate touching during their treatments.

In any tax audit, the IRS reviews financial and account information to make sure that has been correctly reported. An audit is also used to verify that the amount of taxes assessed is accurate. This post will discuss how the IRS selects returns to audit and the audit process.

The IRS uses random selection and an initial computer screening as one way to select a income tax return. Document matching may flag a return if the amount listed on a W-2 by an individual does not match information submitted by an employer. If the IRS audits a business partner or investor, they also audit your return in a related examination.

Most audits occur via mail and request additional information. An in-person interview is also possible and can take place at your home, business or tax attorney’s office. In advance of the interview, the agency will ask that certain records be available for review.

A cash payment offered to an auditor is a red flag, but there could be a situation when it seems you are negotiating the penalty rather than what is later characterized as paying a “bribe.” This case demonstrates the necessity of consulting with a tax attorney at the first notice of a tax audit. The lawyer can then handle communications with the agency, which reduces the chances of a misunderstanding.

Source: The Boston Globe, "Lowell chiropractor pleads guilty to bribing IRS auditor," Rachel Riley, Oct. 4, 2014

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