IRS Legal Advice: Should You Believe What IRS Employees Say?

Below are two statements, neither one offensive and hardly shocking:

  • IRS employees represent the government, they do not represent taxpayers.
  • IRS auditors and revenue officers should not give IRS legal advice to people they don't represent. Taxpayers have a fundamental right to hire a tax professional to represent them.


Many times we are told by our clients about the legal advice that IRS auditors and revenue officers give them —things in our opinion that should not have been said. Things like:

  • "Don't hire a tax attorney, because they can't do anything for you."
  • "You owe what you owe. All you can do is get an installment agreement."
  • "You can't file bankruptcy to discharge a tax debt."


Here is what sparked this article —  some very big mistakes our clients could have made if they believed what an IRS employee was telling them. 


Some introduction. There is an IRS Offshore Voluntary Disclosure Initiative (OVDI). When using this Offshore Amnesty, your penalty rate is based upon your state of mind. If you intentionally evaded taxes, your penalty rate is the standard 27.5% of your highest account balance of any unreported account. If, however, you didn't know about the law, or you made a innocent or even negligent mistake, you can argue for lower penalties. Doing this is called "opting-out" of the standard Offshore Penalty.


What we are hearing reports of is taxpayers in the OVDI who made innocent mistakes being told by OVDI examiners that they shouldn't opt-out and just agree to the higher 27.5% penalty. Again, that 27.5% penalty if for those who engaged in intentional tax evasion…so why would they tell someone who made an innocent mistake to take that route?!


And worse, some of these OVDI applicants probably believe the OVDI Examiner.


Why do OVDI examiners (and other IRS employees) give advice when they shouldn't?


This is what we have observed. IRS employees have huge caseloads, and are given more cases each day. Every week they are given new procedures to follow. They are understaffed and are pressured into closing out more and more cases.


The IRS employees do not care about justice for you. On the other hand — they really don't care about seeing you stuck with a high bill. They are actually indifferent to what ultimately happens to you. They are thinking of themselves! (Of course, we all do, and IRS employees are human as well).  The most important thing they can do to help themselves is to clear their case load ASAP. This is one of the biggest criteria, if not the biggest, the IRS uses to judge those suitable for promotions (and demotions). IRS employees are NOT judged based upon how much money they assess or collect; not how miserable they can make taxpayers; not how fair and judicious they perform, but rather, how quickly they can process cases that are assigned to them.


You must have this perspective when considering the merit of legal advice an IRS employee is giving you. What they really could be saying isn't something that is in your best interest. But rather, what they really mean is, "Please do it the way I want you to. I have a performance evaluation coming up and I need to clear more cases even though the IRS has imposed more demands on me." If you received advise and are unsure if it's the best course of action for you, contact us for a free consultation.