Fraud audit – What to do

CRIMINAL Investigations can be initiated from information obtained from within the IRS when a Revenue Agent (auditor) or Revenue Officer (collection) detects possible fraud.  Information is also routinely received from the public as well as from ongoing investigations underway by other law enforcement agencies or by United States Attorney’s offices across the country.

What should you at this time?
1. Verify the identity of any agent who comes to your premises. Get a business card.

2. Do not talk with or write to any IRS personnel anymore.

3. Hire a CPA or criminal tax lawyer to represent you.

4. Execute a POA (Power of Attorney) and an engagement letter with your rep immediately.

5. Keep a copy of both POA and engagement letter at home, your office, and with you at all times.

6. Refer all calls for documentation or explanation to your tax representative.

7. Do not provide any more documentation directly to the agents. Go through your rep.

8. Provide the good, the bad and the ugly to your representative. Don’t hide stuff from your guy.

9. Prepare written memoranda of all meetings, dates, people, questions and responses.

10. List and copy each page that you provide to the IRS.

Word of Advice: Do not take fraud cases lightly. As soon as one or a combination of these red flags appears, hire a representative—preferably a tax attorney or seasoned CPA. This is not the time to be cheap. Defend yourself properly.
Caution: Do not innocently offer discounts for services or goods to an agent. Such discounts are considered bribes. IRS personnel are clean—the cleanest among civil servants. The Service has zero tolerance for bribery. An innocent offer can lead you to CID.

Informant? You may have been referred by an informant—a vengeful employee, ex-husband, girlfriend, or jealous competitor. Auditors are reluctant to reveal this info but I’ve learned a subtle way to get a hint: when an auditor responds by saying that “I’ll ask my manager,” you have been referred. If auditor says “I can’t tell you” you have been referred.


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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in Pasadena, California.

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He has 50 years of experience in defending taxpayers audited by the IRS, FTB, EDD, BOE and other governmental agencies. He is publishing a book on his expertise – “HOW TO AVOID OR SURVIVE IRS AUDITS.” Our readers may inquire about the book or email tax questions at

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