ANLA and OFA have received reports suggesting that the Internal Revenue Service (IRS) might be stepping up audit activity of employers in our industry. As is the case with other types of government audits like wage & hour and I-9 audits, there are general good practices to follow. Each case also has unique facts and circumstances, so it is important to seek and follow good professional advice. 

Tax compliance in our industry can be particularly tricky. There are special rules applying to agricultural enterprises, such as when and how inventory is valued. Businesses that are growing both nursery and greenhouse crops as well as buying plants from others may face special challenges. 

Following are general background and good practices with respect to IRS audits. 

• If you are audited, please contact ANLA or OFA immediately to report this.
  
  
• The IRS does not contact an individual via e-mail for an initial appointment. Contact related to being selected for an audit will be made via telephone or mail only, due to disclosure requirements.
  
  
• If the IRS calls, what do you do? It is best to strike a cooperative tone. There is little to be gained by confrontation. The IRS has extensive enforcement authority; if it wants to see specific records, more often than not, it will eventually secure the authority to do so.
  
  
• Do not turn over anything to the IRS without first talking to your tax advisor.
  
  
• Do not volunteer more than necessary. The examiner may be looking at a very narrow range of issues, and you certainly do not want to open up the proverbial "can of worms."
  
  
• You should immediately contact your tax advisor, accountant, or attorney. Ask whether your advisor has specific experience and success in this area. If not, ask them to recommend someone who has. Many advisors will suggest they meet with the IRS alone. A qualified advisor will protect your rights and keep the audit on a narrow track.
  
  
• Be familiar with your rights. They can be found at http://www.irs.gov/uac/Taxpayer-Rights.  Thanks to the Taxpayer Bill of Rights, the IRS has standards for selecting a reasonable time and reasonable place for taxpayer interviews. If the IRS is insistent in conducting a field audit at your office, it may be difficult to prevent it from taking place.
  
  
• The Service will consider, on a case-by-case basis, written requests by taxpayers or their representatives to change the place that the Service has set for an examination. In considering these requests, the Service will take into account the following factors:
  
  
• The location of the taxpayer's current residence;
  
  
• The location of the taxpayer's current principal place of business;
  
  
• The location at which the taxpayer's books, records, and source documents are maintained;
  
  
• The location at which the Service can perform the examination most efficiently;
  
  
• The Service resources available at the location to which the taxpayer has requested a transfer; and
  
  
• Other factors that indicate that conducting the examination at a particular location could pose undue inconvenience to the taxpayer.
  
  
• You do have the right to suspend an interview at any time to consult with your tax advisor.
  
  
• Generally, the IRS can include returns filed within the last three years in an audit. Additional years can be added if a substantial error is identified. Generally, if a substantial error is identified, the IRS will not go back more than the last six years.
  
  
• If an audit is for an older year, you may be requested to extend the statute of limitations for assessment of your tax return.  The statute of limitations limits the time allowed to assess additional tax. The statute of limitations is generally three years after a return is due or was filed, whichever is later. There is also a statute of limitations for making refunds. You do not have to agree to extend the statute of limitations date.
  
  
• Remember to report to ANLA or OFA if the IRS initiates an audit of your business.