Those who have no fear of an IRS audit? We all do. We all fear the face to face, exhausting, unpredictable and time-consuming interaction with agents of the Internal Revenue Service's.
We all are afraid that the feeling when submitting our tax returns ... Would I be tested? Was I too aggressive? If the IRS "red flag" my tax return? Maybe I should ask for a smaller refund, so I do not check ...
And then happened to check the refund, we need to deposit the check in our account andAfter a while we tend to forget about the IRS, to make test, and our fears nothing more than an old memory.
For most of us hear the story (here), at least until next year. For some it is about. The real story starts when you open your e-mail and an envelope from the Internal Revenue Service and in him a letter about you that your tax return is audited. Wow! an examination. What should I do now, you ask? imagine the end of the world.
The best thing to doAt this point, the "Face your fears." Read the instructions carefully, what the IRS wants, what year is being examined) the extent of testing (partial, full, testing and what is the necessary documents, and then, once a CPA.
A CPA that specializes in testing, has to confront better the experience, knowledge and skills to the IRS, and maneuver through the difficult process of revision.
Face Your Fears
Our true life story begins at the point where I have received such a letterfrom a client and notify him that his 2002 tax return is audited, the IRS and asked him for additional taxes amounting to U.S. $ 20,000 to be paid. Needless to say that (the client is a small business from the "Big Apple") was extremely confused, anxious and nervous.
Since I have not prepared a tax return in 2002, and was maintained only by the client to represent him at trial, was the first thing I did what the customer before we have to explain.
An audit, I have explained, is notEnd of the world. The objective of an audit is to the IRS to provide as much information as possible without revealing unnecessary details. In the next few weeks we will review the letter and your tax return and see what documents we should go to the IRS in order to support the return, I have received and asked the client send me the tax return, the IRS notice and all receipts for the tax return.
Having all the information reviewed, it wasI understand why the IRS has decided that this specific tax audit - the relationship between income and expenses (deductions) on the return is not comparable with the IRS averages and triggered the very large deviations from the average, the full IRS audit.
When I called the client and asked him why the statement was filed with views of the IRS statistics, he replied that there was a case of bad advice he had received, was in the preparation of tax returns.
Too bad, I said, but again not theEnd of the world.
We had 30 days to respond to the IRS, so we had to move pretty quickly to not under pressure nut. Always request more time if you need flair.
Information, information, information
The next step was to all relevant information, documents and statements that would help us to gain the support of the tax return. In general (and thus also in this case) the information required includes:
Account statements
Copies of canceled checks
RevenueDeductions claimed on the return
Profit and loss account report - even as profit and loss report (if corporate revenues and expenses known)
Payment checks - for mortgage, property tax, donations and other deductions
So we have started collecting the data, calling the banks, mortgage banks, county government and suppliers billing department and asked for copies of the documents, receipts, checks and statements. Within 3 weeks we had all the intenserequired information.
To make sure I'm not missing anything, I went carefully through the tax return and check every item on it, marking all documents that support and corresponds to each element.
The clock was ticking fast, we had one weeks to go until the expiry of that period, IRS.
One on One with the IRS
At this point I've checked the client of the tax return and all supporting documents, I knew what the problems with the return and whatis to search the IRS agents.
I was ready to go one on one with the IRS.
I call the IRS agent, beautiful, but very strict lady (who was not too happy with my desire) it after the deadline to meet and conduct a meeting in her office for the exam.
At the time of the test, I showed up at the right time, at 9.30 clock, ready with all necessary information. The IRS agent showed me into her office, located behind a locked door ( "Employees only beyond this point"). She did not hidethe fact that they are very skeptical about this taxpayer and the tax and pointed out that the figures look very strange.
The first part of the audit included a long series of questions about my clients. In this section, the IRS will attempt to gather information about the taxpayer, his income, expenditure and assets. The IRS goal is to run the data that the agents in the determination that your tax return is correct advice to help you (or worse, made basket) is open to:
Where does he live? live
What is he by profession?
Where is his business?
Who are its customers?
Who are his suppliers?
What are his source of income?
Bank where he lives? What kind of property he owns?
and many other questions about the taxpayer, its business and operations.
I have answered the agent, if only the information that I disclosed on the taxpayer and not a drop more. It is very important to you the issues openly, without volunteeringInformation that was not asked.
Once that part was over, the moment of truth has arrived: the numbers. At this point I took a huge package I have prepared in advance, included reducing the hundreds of documents, statements and especially the pooling of data in a simple report with the proposal, the additional tax of $ 20,000 to $ 3000!
I have the IRS agent about the package I brought with me and suggested that explained by allDocuments to know (that it may take a long time to complete), or my summary report and try to verify some of the products on its use. The agent will be the motivation of her, complete this test, embraced my second proposal and asked for my summary report to be seen.
She took my report and ask me for evidence of multiple prints made in the summary. I was ready with all documents and was therefore able to verify that all investigations. After they receive proof ofthe accuracy of about 10 items, the agent felt comfortable enough to accept my report as true and correct.
Result of an additional tax assessment was $ 3,000, a long way from the original-$ 20,000 asked by the IRS.
Conclusion
When you write a check to the IRS - do not panic.
Read the letter to see what exactly will be considered and what is needed to continue.
Call your CPA for advice and representation (your CPA is better equipped to handle the IRStricky questions).
Preparation for the test thoroughly and collect all the necessary information to support your tax return.
Let's answer some time, to get an extension for responding to the IRS reserved.
Identify the problem areas in your tax return and try to draw the attention.
Be honest, do not open (but, do not volunteer information) with the IRS agent.
Try the test does not lead to follow.