tax audit
Tax audits winding down
Friday, June 4th, 2010 | tax | No Comments
We are winding down a year of tax audits of sole proprietors - that’s folks who have unincorporated businesses. Next coming from an IRS auditor near you will be audits of corporations. June 15th- the 14 new IRS auditors in the Knoxville office are going to training school in corporations. I expect to see a big push on corporate IRS audits. Can’t wait to see what nasty adjustments they try to make in the coming year.
Our track record for taxpayers we have represented in examinations has been good. Beyond the technical details, there’s an art to handling an audit to prevent the IRS from overrunning the taxpayer. We hope our success rate will be just as good with corporations later this year.
Fraud and Embezzlement
Tuesday, May 25th, 2010 | consulting | No Comments
Workplace fraud is an age-old problem in all types of businesses. Whether it takes the form of financial statement fraud, corruption, or misappropriation of company assets, the cost to businesses is estimated at seven percent of annual revenues, according to the Association of Certified Fraud Examiners (ACFE). Their new report, to be released June 2, indicates that almost 90% of workplace fraud consists of misappropriation of assets. This may range from pilfering office supplies to complicated large scale schemes. Frauds may continue for years before they are detected. In forty percent of cases, the fraud is revealed by a tip. This report shows a snapshot of workplace fraud and how it is detected.
Small businesses are especially vulnerable to occupational fraud because internal controls often are not robust enough and because various duties must be combined and carried out by the smaller staff.
We are presenting at a small business seminar in Morristown, TN on June 8 sponsored by First Tennessee Bank. We will show how workplace fraud and embezzlement can happen right under the owner’s nose. We will also give attendees some practical ways to improve their companies’ internal controls.
In another presentation that day, we will talk about the increase in IRS audits and what business owners can do to make sure their books and records will withstand IRS scrutiny.
Business Tax Audit Tips
Tuesday, March 16th, 2010 | tax | No Comments
A letter or visit from the IRS can be a traumatic event. It’s important to react calmly, stay in control of the situation, and call a professional you trust (us, for example) immediately. The IRS relies on its intimidating reputation, but you have rights and they have restrictions. We commented on this tax audit story on The Street.com.
March Madness
Wednesday, March 3rd, 2010 | tax | No Comments
One of our CPAs is a member of a local service club. She heard from another member about someone who received an audit notice from the IRS. He knew his return was correct and he had nothing to hide, so he took ALL of his records to the auditor. The auditor thanked him and said he would contact him in a couple of weeks.
Two months later the auditor called and asked for documentation for certain expenses. The taxpayer told him he already had sent that documentation, but the auditor said he did not, please send the records. The auditor would not admit this, but he had lost the records. What is worse, the taxpayer had given the auditor the original documents instead of copies. So now, the taxpayer is faced with the task of proving items on his tax return by reconstructing the documentation that the auditor lost. It’s a nightmare that’s causing his own version of March Madness.
It’s a cautionary, but true, tale to remind you to keep your originals, and engage a pro to represent you before the IRS.
Oddball Deductions
Monday, March 1st, 2010 | tax | No Comments
Sometimes it pays to think outside the box about deductible expenses, as reported in this post on Kiplinger.com. These taxpayers probably had to fight the IRS to keep their deductions, but the payoff apparently was worth the cost of engaging effective representation.
Which brings up an important point - for your protection, you should never deal with the IRS without representation by someone who knows how to respond to their tactics. I have a horror story to tell you in another post.
Audits On the Rise
Wednesday, February 17th, 2010 | tax | No Comments
The news has hit the mainstream in this article from CNNmoney.com. Karen Hellmund is a member of the TSCPA IRS tax liaison committee. We learned from the horse’s mouth several months ago that more audits were coming, and we have been working to get the word out to our clients and friends ever since. See our October 2009 email letter. We found out that the Knoxville local office received a very substantial staff increase of fourteen new auditors.
Here are some general points to keep in mind (consult your tax advisor for specifics pertaining to your situation):
Keep good records. You should be able to prove every amount on your tax return.
Don’t ignore a letter from the government. They won’t stop, and they will get meaner.
Don’t assume that your return is wrong. IRS computers choose returns to audit based on formulas, not just errors.
Don’t respond without professional representation. We’re not just drumming up business here - the IRS is in the business of collecting money, and they will do all they can under the regulations to maximize the amount they collect.