IRS Audit - who should attend

Hi
briefly, my husband is a USC, I'm a British citizen, married 15 years, living in the UK most of that time. 4 kids so we've been receiving a tax refund since we started filing about 8 years ago...if anyones interested it goes back to the US to pay off husband's student loan.
So, last year's (2010) refund got withheld...it took them till now  (after many phone calls since last february) to write requesting information, and informing us of a phone interview for the audit once we had submitted info...the huge list was all we'd expected, proof the kids exist and live with us, proof of their USC status, proof of our incomes, etc...with the delay of the mail going thru the London embassy we received the letter 9 days after it was dated and it stated if you needed to change the interview date you had to call within 10 days. So I called today and got straight thru to the very helpful contact person, he rescheduled the interview, asked if we had all the info and clarified some points. said to call back with any other questions. Then I called our accountant (US based) to get some info that we needed....and he YELLED at me that noone deals with the IRS and we should sign power of attorney over to him and let him deal with it, otherwise we'll answer something wrong and make a mess of things.
This is not sitting so well with me, so I'd love to hear other opinions, professional opinions, or if anyone UK based has gone thru an audit what they did.... many many thanks
Al

I missed this post the first time around (but had responded to earlier posts of yours).  How is your audit coming?

i was beginning to wander why noone was answering.
decided to let the accountant do the talking for us, it should be this week just trying to get all the paperwork in order. thanks for asking tho

If I am reading your post correctly, this is a phone interview not a face to face one?

To answer your original query, it is customary for the taxpayer to attend the interview and usually have some sort of representation (accountant, attorney, etc.).  However, nothing in the interview should be a surprise, as you would have gotten a full list from the IRS of what is expected to be discussed, and equally your representation should have fully discussed his approach to the questions.  The interview should be more of a going through the motions rather than discovery.

I assume since this is your US accountant and you are discussing Power of Attorney's that you will not be attending?  I would find this worrying given your accountants lack of knowledge.  I also find it worrying that accountant does not want you speaking to the IRS - this is an unusual step and makes me think he is covering his own butt.  If this is indeed a phone interview, I would absolutely recommend you attend.

Please do recognise that if you have done things correctly (impossible to tell given your accountants lack of knowledge), then you should be ok.  Audits aren't the scary things that they have been made out to be in the past.  If you do lose, recognise that you do have a defensive in that you reasonable relied on someone (your accountant) that should have known better.  However you will need not delay in firing him or that defense will be ignored (and potentially even ignored now given that you know he is poor already).

I do have one further concern.  You state that you have already provided evidence of the children and citizenships, etc.  An interview is rare these days and is not usually called when the questions have been effectively answered via post.  When the IRS gave you the list of questions/evidence to be discussed in the interview, did they point to anything else?  Did anything come across as fishing for something? 

I appreciate your input, altho' it's a bit late to alter anything.
But to answer your points, it is a phone interview, we're in the UK. after speaking to a couple of accountants in the US and a few friends who'd also been thru audit, only one had done their own phone interview, so we went with giving power of attorney over to the accountant.
Everything so far simply points to foreign residents with children. there was no correspondence prior to the interview notice which had a request for documentation.  aside from proof the kids exist they asked for proof of income but then said they'd be happy with a letter written by us detailing income in the year in question, and also the rates of exchange and method used, obviously a question for the accountant.
tbh, that year we were both in salaried jobs, fairly straight forward stuff, no savings, no ISA's, no complicated stuff.
One question, you mention the possibility of "losing", what would that mean? and by "defense" does that mean we could appeal, using a different accountant?
thanks for your time

Audits for taxpayers overseas are very rare indeed. I attended a few at the IRS office at the Embassy in Grosvenor Square in 1989; but never since.

The IRS should have given you an IDR. See here: http://www.irs.gov/irm/part4/irm_04-046-004.html

Why are you beng audited? Have you filed all of the information returns? Have you reported child benefit, child trust funds (3520 filing etc), UK pension plans (possibly more 3520s), filed FBARs each year? You really, really need to know what the risk is before rushing in to speak with the IRS.

I appreciate your input, altho' it's a bit late to alter anything.
But to answer your points, it is a phone interview, we're in the UK. after speaking to a couple of accountants in the US and a few friends who'd also been thru audit, only one had done their own phone interview, so we went with giving power of attorney over to the accountant.

Yes, it would be unusual to speak to the IRS alone in the interview but I would strongly recommend for you both (you and your accountant) to be present on the phone.

Everything so far simply points to foreign residents with children. there was no correspondence prior to the interview notice which had a request for documentation.  aside from proof the kids exist they asked for proof of income but then said they'd be happy with a letter written by us detailing income in the year in question, and also the rates of exchange and method used, obviously a question for the accountant.
tbh, that year we were both in salaried jobs, fairly straight forward stuff, no savings, no ISA's, no complicated stuff.

I would make sure you are comfortable with the request for documentation and that you have discussed with your accountant how these questions will be answered.  This is particularly important if you are not attending the call.  In short, make sure your accountant can properly speak on your behalf and YOU understand why the IRS is asking what they are asking.  Not being informed yourself is a limited defense.

One question, you mention the possibility of "losing", what would that mean? and by "defense" does that mean we could appeal, using a different accountant?
thanks for your time

Losing means different things for different people.  In some cases it means huge repayments to the IRS with large penalties and interest.  In your case, losing could mean not getting your refund, having an audit opened into prior years and having to repay refunds from those years or even owing money if the IRS doesn't think you have met your US tax burden (the latter seems particularly unlikely given your description).  It is very difficult for me, a stranger, to say without knowing your very detailed situation.  

If you did lose and owed money, you can appeal to have some of the balance reduced (partcularly the penalty and interest piece) on the basis that you reasonable relied on your accountant.  It is a limited defense because at all times you need to understand your circumstances.  However it is good to have in your pocket if needed.  In order to make this defense though, you can't have your accountant represent you - because why would you let someone with poor skills to continue to act in your behalf ... well you wouldn't.

And, again, please consider getting a new accountant that will remove you somewhat from this mess.

Audits for taxpayers overseas are very rare indeed. I attended a few at the IRS office at the Embassy in Grosvenor Square in 1989; but never since.

I had one in 2008 and it was the first one that my office (one of the Big 4) had seen in ANY memory.  It was an actual face to face interview as well - auditor's first time to the UK and she was a wee bit green.  I do not know anyone since (Big 4 or boutique) that has seen an overseas taxpayer audit with an interview since then.  For this level of risk, the interest in an interview is very bizarre.

ok, excuse my ignorance but poor advice has already been established here so I really appreciate your input.....child benefit needs to be declared? where?
we've only ever been asked about  savings and having  10k plus in the bank at any point.....isn't it just income that is declared?
any advice that can get us out of a hole would be appreciated.

Yep, UK benefits are US taxable when paid to a US citizen, even those that are not taxable in the UK.

I'd enter the amounts on 1040, line 21.

I havn't got kids, but this is useful info in the event of.  I assume child benefit would usually be cancelled out by the 1040 personal allowances though? (assuming that other income was all covered by the FIE?

Also is anyone aware if UK child benefit can be paid to either the dad or mum to avoid this extra paperwork?

Yes, Child benefit can be paid to either parent.