Overview
This session of the Private Client West Cost Forum 2024 explored the current state of audits and tax controversy and shared practical advice to prepare for challenges ahead of a contest with the IRS or Franchise Tax Board (FTB).
Session panelists included Charles J. Moll, III and Kevin Spencer.
In Depth
Key takeaways included:
- With increased funding under the Inflation Reduction Act of 2022, the IRS intends to spend billions of dollars on improving its technology and hire 87,000 new employees over the next 10 years. Taxpayers can expect more in-depth audits of high-net-worth individuals and their related returns where the taxpayer has a controlling interest and where “a significant compliance risk” is deemed to exist. It’s important to note that the IRS’s plans may face significant changes under the Trump administration, potentially reducing the scope and focus of these enforcement efforts.
- When a taxpayer is unable to reach an agreement with the IRS during an audit, the taxpayer can consider Fast Track mediation, an alternative dispute resolution option before proceeding to IRS appeals.
- In anticipation of potential audits, taxpayers can prepare now to address their tax position by ensuring sufficient tax deposits are made, identifying potential tax risks, and preparing and gathering necessary documentation to substantiate their tax positions. These and other preparation steps can be completed with the help and advice of legal counsel.
- Among state and local tax developments, taxpayers with potential tax obligations in two or more states may be aware of tax credits available for taxes paid to their non-resident state, which can be used as an offset against their resident state income tax. These taxpayers may also want to consider similar local jurisdiction tax credits and their availability in the case of Zilka v. City of Philadelphia (Tax Review Board, No. 23-914), which is currently pending before the US Supreme Court.
