For a federal tax audit, can you deny providing previous tax year returns?

Question

I have a friend who is going through a major face to face tax audit next week.

I remember reading somewhere that if the auditor asks for a previous year tax return that you should refuse to do this. It went on to explain why and how do refuse nicely.

Does anyone know about this or remember reading this article. It was sometime in the last 1-2 months in a magazine and could have been in Money but I cannot find it now.

Answer 1

I remember reading that, and it probably was Money Magazine.  But I think the advice was not to provide backup information or documentation about any tax year not specified in the notice of audit.

Answer 2

Not providing information makes it look like you would have something to hid,  IRS has access to the returns even if you don't provide them.

Answer 3

I don't know where you read that, but it would be very bad advice.  What the article might have said is not to volunteer any info they don't ask for - that's GOOD advice.

First of all, they already HAVE your earlier returns.  Think about it.  And they have every legal right to audit those too, and probably will if they find a problem with the one they are auditing initially.

Answer 4

I have never heard this and I assume the IRS agent can just go look it up himself at his office if he wants.  Still, if your friend wants to go this route he could just tell him that he keeps that info at another location or something (I wouldn't say "no, I refuse to give it to you", no reason to p**s the agent off).  I can easily see how the prior years tax numbers could cause problems, but again I assume the IRS agent can look it up anyhow, so this is not gonna help much.

Answer 5

Since your friend is being audited, why would you want to aggravate the IRS by reusing to supply any information that they ask for? It is my understanding that once you are audited, that they can go back to the past 7 years income tax returns, and forward for the next 3 years income tax reutrns.Have ;your friend make their best effort to supply any information that is asked for. Don't take a chance of making things any worse than they already are.

Answer 6

I'm assume this is a field audit and not an office audit.  An office audit is where you're coming to meet with the tax compliance officer.  Yes, it is true that the agent/examiner can get the requested return internally as others have stated.  The reason to get the return from your friend is because it will be a lot faster than order it internally which can take months in some cases.  Thus, it could extend the audit longer.  In addition, it gives the agent another reason to expand the exam to other years because he/she thinks your friend might have something to hide.  In any case, keep in mind of compliance that the examiner need to address in the case.

see http://www.irs.gov/irm/part4/ch09s09.htm...

4.10.5.3  (05-14-1999)

Prior and Subsequent Year Returns

   1.  The taxpayer’s prior and subsequent years’ returns should be inspected for proper filing and to evaluate audit potential. The returns should be evaluated for issues related to the year under examination and for large, unusual, and questionable items.

Answer 7

The Constitution protects us in situations like this. Your friend could ask "can this information be used against me in court?" Of course, the answer will be "yes". Once that is established, they cannot force you to be a witness against yourself. It's true that they do have your returns available to them, and that is all they are entitled to.