New Tax Audit Format: Video tax audits may be next


As things stand right now, the IRS conducts audits through two primary formats – field audits and correspondence audits. A field audit is what most people think of when work and informs you that there's a problem. The second, and infinitely more common, type of audit is the correspondence — more commonly known as "corr" — audit.


The IRS prefers the corr audit because the costs are low and their ability to collect is substantially higher.


Yesterday, the IRS Taxpayer Advocate Service announced the possibility of a new tax audit format: the video audit.


The problem with corr audits

IRS Taxpayer Advocate Nina Olson nicely laid out the problems with corr audits:


"While the IRS instituted correspondence or “corr” exams in an effort to conserve its resources and minimize taxpayer burden, IRS customer satisfaction surveys and Taxpayer Advocate Service (TAS) research studies have consistently shown that for the majority of taxpayers subject to this method of auditing – many of whom are low income and unrepresented – corr exams are an unnavigable labyrinth. In fact, in a statistically representative survey of Earned Income Tax Credit (EITC) taxpayers who had been audited, over 70% said they would prefer some other audit method than correspondence."


Clearly something is wrong. If people are in a position where they're saying letters, which are particularly unobtrusive, are a problem, then it's time to pay attention. Sometimes you need things to get a little messy so that you can continue on with your life. If the tax problem isn't brought into the light of day where it can be dealt with, then so many people are going to sweep it under the rug.


New video service?

The new proposal is to create kiosks at IRS service centers. Potentially, with the right positioning, these kiosks might also eventually find their way into other governmental buildings, such as post offices and libraries. Without a doubt, this proposal outlines what would be a major advantage to taxpayers.


First,  this would allow taxpayers to benefit from the many positive attributes of non-verbal communication. It would allow them to be present as a real person with real emotions to the IRS, instead of just a voice coming through one end of a telephone. And yet, while this is a huge benefit of the proposal, it's still not why I can imagine the program being a resounding success.


The true benefit?

As opposed to the corr audit, these new video audits — if they are actually put into place — have the tremendous benefit of assigning one auditor that is responsible for the case. This is a significant improvement over the corr audit process as it would be a bigger help than just implementing video. Taxpayers will have one person they are dealing with and that one person would have access to all of their information. This will — if the process is implemented — result in a incredible reduction of stress and wasted time.


Having a tax problem is stressful, that's a given. But the really frustrating bit is when you have to repeatedly call the IRS and keep your calm while your call is being shuffled from person to person, often with inhumane wait times between representatives. And with the possibility of a "courtesy disconnect" making your two hours on hold completely pointless, it's enough to drive anyone to the brink.


Conclusion: I like it, but I could like it more…

I'm going to be bold and make one additional suggestion to this (possible) new initiative. A lot of government buildings are rather inhospitable places and we've all experienced it. Limited parking, limited access, and the joy of body scans brings on the shivers. Let's face facts: no one really wants to go to these places.


Meanwhile, many homes and offices are cozy and happy places. With the rapid march of technology, many people — including a significant number of unrepresented taxpayers — have access to video chat. As for us tax professionals, it is far more effective for us to conduct video conference from our offices rather than making site visits. That way we don't have to pass along our traveling expenses to our clients. So why not allow taxpayers and representatives to use video conferencing to discuss strategies and implement them? As far as security goes, it's as safe as using a telephone. Additionally, with software like Skype, a taxpayer could be in Hong Kong, their tax attorney in Connecticut, and the IRS in Memphis, but everyone could be on the same page.


The advantages that video audits could bring about have the potential to be enormous. So, for now we just have to keep our fingers crossed and hope that the IRS makes it happen. If you do find yourself with an overwhelming tax problem, don't hesitate to ask for help. While not yet in the realm of video, help is available in person or via the phone from tax attorneys throughout the country. Your future is important and it's worth fighting for.