Although there are various administrative options for contesting a tax assessment or collection action issued by the Internal Revenue Service, the process might still seem intimidating for many New York readers. IRS correspondence may seem like it deserves a presumption of correctness, or that it carries the imprimatur of official government action. Yet a recent news story shows that even IRS determinations can be fallible or influenced by bias.
A recent audit of the IRS, memorialized in a Treasury Department inspector general’s report, found that IRS line employees might have targeted conservative political groups for audits. Under standard protocol, a return goes through multiple stages of internal review before being selected for a tax audit. However, that multi-step review process may have been circumvented in the case of conservative groups seeking nonprofit status.
Initially, federal tax returns are screened for deviations from certain statistical norms, developed by the IRS. An IRS auditor, who may have the discretion to accept the return as filed or forward it on to an examining group, next reviews flagged returns. A manager next reviews a return, attempting to reconcile any flagged items on the return with industry practices or other factors that could resolve potential discrepancies.
The risk of an IRS audit is low — as few of 1 percent of federal returns nationwide may be selected for an audit. Even that process is not absent of various IRS correspondence and opportunities for explanation. Options like a Collection Due Process hearing provide a more informal, administrative setting for disputing lien or levy notices. A taxpayer also has the option of representation by a tax attorney at such meetings, for added peace of mind.
As might be expected in politics, however, the allegedly improper behavior by the IRS employees in this story is being overshadowed by questions about which supervisory officials should be held accountable for the potential management oversight. That inquiry has even posed questions to President Obama, who reportedly did not take immediate action after his White House counsel informed him of the early audit reports.