Audit by Irs can stop ?
Q.I am comfortable with the idea that any goverment can make an audit from IRS about what ever it wants, when it wants. With that thought as a given, my question is: As a practical matter, does the IRS routinely examine a taxpayer's bank or credit card accounts? Or to put the question another way; Does the IRS routinely go on a fishing expedition and search or scan a taxpayer's accounts to see what tranactions or activities have occured? And how long will the audit stop ? The logical objectives of such a search would be to determine where the taxpayer's money was coming from, in what amounts, where it went, and possibly why. This question poped into my mind after an IRS auditor asked to see one of my business checks and copied down the bank or checking account number. Any thoughts or comments?
A.Recent laws have made the penalties for such fishing expeditions more severe. If you are under examination and they ask for such things - you must supply them or they can summons them. No, the IRS doesn't routinely look at a taxpayer's bank account and credit card information outside of an examination context. A request to look at such information may very well be part of an examination, but generally you'd be asked to provide the information. But the IRS doesn't sit out there and just look through bank and credit card information on people without their knowledge. The agent likely will document that he or she looked over such information--my suspicion is that the primary reason for writing down the account number is to document that he/she actually saw enough information rather than simply checking off "I did that" without actually doing anything (supervisors worry about that). Obviously, such information might prove important should the examination end up "expanding" to assure that all accounts have been looked at. As a practical matter the IRS only reviews bank and credit accounts if they have some real reason to believe that you are cheating or misreporting things. Of course, they can do this anytime, but generally only do it if you have suspisious looking transactions or if your income and/or spending patterns change significantly all of a sudden or they have some other reason to suspect something is fishy (some would say they will also do this if you piss off bill or hillary, but I think that's abit paranoid). Especially since all the attention to past taxpayer abuse, the IRS doesn't usually waste their time on "fishing expeditions" and restrict their searches to truly suspisious cases. I don't think they ever abuse the proceedure WIDELY, even before the scrutiny, but that scrutiny has made them even more cautious about massive intrusions into taxpayers who generally do the right things. Of course, they do perform "spot audits", as they should to keep us all honest and in those cases they will sometimes "poke around abit" in your financial transactions, but if they don't find anyting in a 30-90 day period that looks suspisious, then they generally will stop there and are highly unlikely to ever look too close at anything to do with that taxpayer again, unless something in the future raises an "audit flag".
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