Some IRS employee audits may require personal attendance at interviews

Plain-English summary

Chief Counsel addressed whether an IRS employee may send a representative to the initial interview in the employee's own tax audit. Section 7521 generally allows taxpayers to attend through representatives, but that protection does not apply to investigations relating to an IRS officer's or employee's integrity. Counsel advised that audits of employees in positions designated as auditable may be treated as integrity investigations because tax compliance bears directly on public confidence in employees who administer the tax laws. Audits of employees in non-auditable positions are not necessarily integrity investigations and require a more specific analysis. Even when the representation right does not apply, section 7521 does not give the IRS authority to compel the employee's cooperation.

Ruling snapshot

• Question: Must an IRS employee personally attend the initial interview in an audit of the employee's tax return?
• Outcome: Personal attendance may be required for integrity-related audits, especially audits of employees in auditable positions, but section 7521 does not compel cooperation
• Key authorities: IRC § 7521

Full text (IRS public release)

ID: CCA-12111250-15 [Third Party Communication:

UILC: 7521.00-00 Date of Communication: Month DD, YYYY]

Number: 201603030
Release Date: 1/15/2016
From: -------------------
Sent: Friday, December 11, 2015 12:50 PM
To: ----------------------
Cc: -----------------
Bcc:
Subject: Employee Audits

-------,

You asked whether employees must attend the initial interview in an employee tax
audit. The concern is that some employees, using the provisions of section 7521(c) are
choosing not to appear at the initial interview and are instead sending a representative
or, in some cases, not appearing at all. You asked us to consider whether section
7521(d), which states that the provisions of section 7521 do not apply to “investigations
relating to the integrity of any officer or employee of the IRS,” would allow the Service to
require the employee to be present at the initial interview. As discussed below, where
an employee audit is an investigation relating to the integrity of that employee, the
employee does not have the right to send his or her representative to the interview
without accompanying them. Moreover, we believe the Service may take the position
that employee investigations of employees in auditable positions are investigations
relating to integrity, whereas investigations of employee in non-auditable positions are
not necessarily investigations relating to integrity. However, we caution that nothing in
section 7521 allows the Service to compel the employee’s cooperation.

Section 7521(a) describes the type of interviews to which section 7521 applies, and
defines these as in person interviews between any officer or employee of the IRS and
any taxpayer “relating to the determination or collection of any tax[.]” It provides certain
rights which taxpayers may assert in connection with these interviews. Section 7521(c),
in relevant part, allows a taxpayer to be represented by an authorized representative in
any interview described in subsection (a), and prevents the Service from requiring the
taxpayer to attend interviews along with that representative. Essentially, the taxpayer
may send their representative in their place. Section 7521(d) provides that section 7521
“shall not apply to criminal investigations or investigations relating to the integrity of any
officer or employee of the Internal Revenue service.

Statutes should be construed “so as to avoid rendering superfluous” any statutory
language. Astoria Federal Savings & Loan Ass’n v. Solamino, 501 U.S. 104, 112
(1991). The language of section 7521(d) does not provide an exception for every
investigation of every IRS employee. Instead, Congress limited this exception to

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criminal investigations and investigations relating to the integrity of IRS employees. If
all employee audits fell within the exception, there would be no reason for Congress to
specify integrity investigations. In fact, the statute could have just stated that section
7521 did not apply to employees of the Internal Revenue Service. Thus, the
investigations relating to the integrity of an IRS employee must be a subset of all
employee investigations.

The Service separates its employees into essentially two categories, auditable positions
and non-auditable positions. We think this is the relevant distinction for purposes of the
applicability of section 7521(d). The Service has already made a judgment about which
employees should be considered auditable. Presumably that is because in positions
involving tax administration, it is important that the employees enforcing and applying
the tax laws be compliant with their own taxes in order to maintain public confidence
and maintain the integrity of the Internal Revenue Service. An audit of an employee in
such an auditable position, therefore, is an investigation relating to the integrity of that
employee in a way that is less true of an employee in a non-auditable position lacking
tax administration responsibilities.

Finally, we note that this advice relates to initial interviews. Should you wish further
guidance regarding whether an employee investigation could convert from a non-
integrity investigation to an investigation relating to integrity for purposes of section
7521, we would need to consider the facts of those specific cases or the specific
policies you were looking to implement.

Please let me know if you have any questions or concerns.