Eggshell Audits: Protecting Your Client in a Criminal Examination

Learn to define the circumstances that can create criminal tax exposure for your clients.

Many tax practitioners, as a source of revenue, routinely represent their clients in civil audits but fail to recognize (or simply ignore) when they are creating a risk of criminal prosecution for their clients by not recognizing the telltale signs that they are dealing with an eggshell or reverse eggshell audit where their client may have committed income tax evasion without the tax practitioner’s knowledge or participation. Practitioners that do not recognize (or simply ignore) when it’s time to punt a client’s representation over to competent criminal tax counsel expose themselves to professional discipline for ignoring the inherent conflicts of interest where a client’s needs to avoid prosecution are ordinarily in polar opposition to the practitioner’s need to preserve their professional reputation with the auditing tax authority. Overzealous audit representatives are also in danger of committing tax perjury or obstruction and face their own exposure if the government expects that they aided and abetted the evasion of their client. This topic will provide effective strategies to recognize and help mitigate the inherent risks for the practitioner and their client when faced with an eggshell audit.

Learning Objectives

• You will be able to define the circumstances that can create criminal tax exposure for your clients.
• You will be able to describe factors to be weighed in determining the likelihood that your client is facing an eggshell or reverse egg shell audit.
• You will be able to discuss with your client the methods of proof employed by IRS auditors and criminal investigators to prove fraud occurred.
• You will be able to explain how a CPA/EA can help assist criminal defense counsel in defending a client and be under the attorney’s attorney-client privilege with the client.