Aggressive tax positions
originally posted: 11/22/2006 reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If in doubt, please send a new question or ask for an update.
Q: Whenever there is a question of proper procedure in preparing our taxes, my tax adviser always takes the more aggressive position. Should I be concerned about the possible consequences?
A: Well, as a practical matter, if the IRS does not agree with your accounting positions, then many taxpayers find it is less expensive to pay the additional tax than to argue with the auditor. So it makes sense to be prepared to pay the tax for the aggressive positions taken on your return "just in case". Legally tax advisor may recommend a position that has as high as 2 out of 3 chance of being disallowed in an audit. In other words, tax advisers are allowed to take aggressive positions and often do so without fear of consequences. This is completely legal. The important think is that you recognize the risks and possible costs.
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