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What is an Egg Shell IRS Audit?

WHAT IS AN EGG SHELL AUDIT?

An egg shell audit is one in which the client and the representative are aware of potential indicators of civil fraud or potential criminal tax violations. The main objective in these audits is to avoid a referral by the revenue agent to the IRS Criminal Investigation Division (CID). The avoidance of a deficiency and civil penalties are lesser objectives. If the auditor does perceive sensitive issues, the taxpayer’s attorney must convince the auditor that the case is best resolved civilly and that the taxpayer’s conduct does not warrant a criminal investigation or prosecution.  Any IRS audit can be extremely stressful.

WHAT SHOULD I DO IF I AM INVOVLED IN AN EGG SHELL AUDIT? 

The first steps to handling an egg shell audit are to identify privileged information and preserve that information. The attorney should then perform his or her own due diligence by conducting an internal audit of the tax return to determine any potential risks. The practitioner must also monitor any warning signs that the IRS revenue agent has made contact with the Fraud Technical Advisor (FTA). A FTA is an IRS agent who assists other auditors to develop the assessment of the civil fraud penalty or determine whether an audit should be referred to CID.

The IRS has established a very structured and comprehensive review process for determining whether taxpayers are referred for a criminal investigation. Representatives must be aware of any indicators of fraud, thoroughly investigate their client’s returns and financial affairs, and carefully prepare for any conversations and meetings with the IRS to avoid statements or conduct that could aggravate a sensitive audit.

CONTACT AN IRS AUDIT ATTORNEY

The IRS Audit attorneys at PEARSON BUTLER Law are experienced in guiding taxpayers through sensitive egg shell audits and can successfully resolve your tax dispute. Please contact PEARSON BUTLER Law today for a free consultation at (801) 495-4104.

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