The time and place of examination pursuant to the provisions of I.R.C. §§ 6420(e)(2), 6421(g)(2), 6427(j)(2) or 7602 are to be fixed by an IRS officer or employee. IRS officers and employees are to endeavor to schedule a time and place that are reasonable under the circumstances. However, it may be possible to transfer an audit in certain situations. The article provides guidance on requesting an audit transfer.
General Points on Audits
It is reasonable for the IRS to schedule the day (or days) for an examination during a normally scheduled IRS workday (or workdays), during normal business hours. It is also reasonable for the IRS to schedule examinations 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 examination.
The IRS will determine whether an examination will be an office examination (i.e., an examination conducted at a an IRS office) or a field examination (i.e., an examination conducted at the taxpayer’s residence or place of business, or some other location that is not an IRS office), based upon the complexity of the return and which form of examination will be more conducive to effective and efficient tax administration.
Audit Transfer Requests
Requests by taxpayers to transfer the place of examination will be resolved on a case-by-case basis, using the following criteria set forth in Treas. Reg. §301.7605-1(e).
Practitioners, should first to address the complexity of the return. This is extremely important with respect to campus audits. If the issue is complex in nature or the records are voluminous, you will need to address this issue as well. Let the correspondence unit know that many documents need to be copied to comply with the IRS requests or the issue is so complex that a face to face audit is needed to fully understand the issues.
The location of books and records and their organization could also be a factor. In today’s world you are representing clients all over the world, just not in your state. If there is an undue inconvenience to the taxpayer firmly state the reason, but use common sense.
The available IRS resources are also an issue. It will be easier to get a case transferred to a live person if IRS is fully staffed in that area. Generally, a highly populated area within your state will have adequate staffing to handle a transferred audit.
Do not simply say that you want to transfer the audit. That will result, in nearly all cases, with a non-transfer. You must state your case. Use terms like “in the interest of tax compliance” and “a more efficient audit can be conducted.” Make sure you DO NOT use terms like, “we are in the middle of tax season,” or “it is just not convenient to have the audit in the campus or at the location proposed.” Remember, you need to make the case for a transfer.
Office examination. If the taxpayer’s current residence (in the case of an individual or sole proprietorship), or the location where the taxpayer’s books, records, and source documents are maintained (in the case of a taxpayer entity) is closer to a different IRS office in the same district as the office where the examination has been scheduled, the IRS normally will agree to transfer the examination to the closer IRS office. The same is true if these locations are in a district other than the district where the examination has been scheduled.
Field examinations. If a taxpayer does not reside at the residence where an examination has been scheduled, the IRS will agree to transfer the examination to the taxpayer’s current residence.
If, in the case of an individual, a sole proprietorship, or a taxpayer entity, the taxpayer’s books, records, and source documents are maintained at a location other than the location where the examination has been scheduled, the IRS will agree to transfer the examination to the location where the taxpayer’s books, records, and source documents are maintained.
Transfer for convenience of taxpayer’s representative. The location of the place of business of a taxpayer’s representative will generally not be considered in determining the place for an examination. However, the IRS may determine to transfer the place of examination to the representative’s office.
Transfer within thirteen months of expiration of limitations period. If any applicable period of limitations on assessment or collection provided in the Internal Revenue Code will expire within thirteen months from the date of a taxpayer’s request to transfer the place of an examination, the IRS may require, as a condition for an otherwise permissible transfer, that the taxpayer first agree in writing to extend the limitations period for up to one year.
These regulations were last updated in the 1990’s. Since then, correspondence audits have increased dramatically. So the issue of transferring an audit has become larger. Being aware of and following the guidance discussed above can aid the experience. But, when it comes to transferring an audit, make sure to state your case and remember that it may take more than one request.
CALT does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. CALT's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.