In certain situations the IRS may need a special type of employee to come in when there are special types of problems within a business return audit. An IRS engineer specialist is usually brought in when help is needed to resolve issues involving basis, depreciation, amortization, fair market value of assets, expenditure discrepancies, research and development issues, and other types of similar issues.
Once the IRS requests an engineer specialist to review a return and make a decision, anything that is found by the engineer is considered binding on the IRS. There word on the matter is considered final in the eyes of the IRS and therefore if the taxpayer has an issue, would need to file an appeal.
Returns & Issues Involving an IRS Engineer Specialist
Certain returns and issues should involve an engineer specialist, these include:
1. All joint venture returns that have assets of $10 million or more
2. Large and medium sized business returns with gross receipts or deductions of $1 million or more
3. Returns that involve fair market value issues
4. Returns that have casualty or theft losses over $500,000
Once a report has been issued by the engineer specialist, you should ask for a copy and keep it on record. If the IRS will not provide you with a copy you can file a Freedom of Information Act request which will force them to provide a copy to you.
Most issues that are handled by an IRS engineer specialist involve some form of appraisal that was done prior to the audit. It is important that the taxpayer obtain an original copy of the appraisal from the source that provided it and keep it on file. If anything were to arise in the audit that is not true, it is important to have documentation to back up your position.