THE IRS AUDIT WORKSHOP From Contact Letter to Closing Agreement Eric - - PDF document
THE IRS AUDIT WORKSHOP From Contact Letter to Closing Agreement Eric L. Green, Esq. 1 CPE There will be 16 attendance check words Please write these down You will need them at the end when you click on the link and go get the
Eric L. Green, Esq.
2 The Ultimate IRS Collection Workshop
There will be 16 attendance check words Please write these down You will need them at the end when you click on the link
3 The Ultimate IRS Collection Workshop
Stick to our schedule 10 Minute breaks at the top of
Go to the restroom and refill
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working with IRS examiners
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Circular 230 Issues Conflict? Innocent Spouse
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client before the Internal Revenue Service if the representation involves a conflict of interest
1.
The representation of one client will be directly adverse to another client;
2.
There is a significant risk that the representation of one or more clients will be materially limited by the practitioner’s responsibilities to another client, a former client or a third person, or by a personal interest
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A practitioner may not unreasonably delay the prompt disposition of any matter before the Internal Revenue Service
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authorized officer or employee of the IRS, promptly submit records or information in any matter before the IRS unless the practitioner believes in good faith and on reasonable grounds that the records or information are privileged
proper and lawful effort by the IRS, … to obtain any record or information …
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taxpayer’s on intent (hobby loss concerns)
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Instructions to the taxpayer
Myspace anything else about the exam!
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should not be there
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A!
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covers
rise to questionable practices
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scope
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interview the taxpayer
to allow the taxpayer to be interviewed!
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years, including the current
Reports?
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field exam)
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to the examiner
additional information if necessary
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before
audit
since 2001!
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live examiner until the taxpayer sends a written response
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it wants as supporting documentation
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down
sent
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exam are those that are simply a matter of documentation that can be handled through the mail
identify returns with a high potential for adjustment
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revenue
if done later – for instance information is verified as false through third party contacts, or entries on the return are contradictory
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audit and propose adjustments
“combo” letters
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appeal to the office that sent the letter
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deal with them
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ignored
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manager are ignored
ignored
Notice of Deficiency
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burden
Exams from the campuses to local offices
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how a taxpayer may request the IRS to transfer an examination from one location to another
and address situations where the taxpayer requested a transfer
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to United States Tax Court
rates for petitioning United States Tax Court
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More than 7 million IRS announcing a new initiative to go after them
.2d 540 (1930)
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More than 7 million IRS announcing a new initiative to go after them
taxpayer to support the information on his or her return.
“contemporaneous” records, per Reg. § 1.6001-1.
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More than 7 million IRS announcing a new initiative to go after them
be easily located
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More than 7 million IRS announcing a new initiative to go after them
partnership with a gentleman by the name of Harris.
quarter to each of the children and one-half to the parents.
distributing to the others.
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More than 7 million IRS announcing a new initiative to go after them
he had no accounting of these expenses.
to tell how much he had spent, in the absence of any accounting records.
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More than 7 million IRS announcing a new initiative to go after them
sums on the shows, those expenses could be approximated and allowed (hence THE COHAN RULE!)
as travel, entertainment, business gifts, EITC, R&D Credits, etc.
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More than 7 million IRS announcing a new initiative to go after them
understand
reported income with specific items/sources
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More than 7 million IRS announcing a new initiative to go after them
cannot be made; infers taxable income
based on the amount of unreported income.
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More than 7 million IRS announcing a new initiative to go after them
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usually Schedule C
exam
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horses
and feed horses
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engaged in for profit is a factual determination
activity with an actual and honest objective of realizing a profit
hobby determination
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years
53
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years
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Factor 1
the activity
Factor 2
advisors
Factor 3
taxpayer in carrying on the activity
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Factor 4
may appreciate in value
Factor 5
Factor 6
losses with respect to the activity
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Factor 7
which are earned
Factor 8 • The financial status of the taxpayer Factor 9
recreation
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Case
TC Memo 2010-216
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income and expense items
taxpayer
will review
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know or have reason to know is inaccurate, incomplete, inconsistent, or suspect is untrue
Revenue Procedure 2014-15
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the information furnished by the taxpayer is either questionable
information be available before they can be claimed
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by businesses who underreport their income, often due to cash transactions
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3 Ways to misappropriate cash from a business
Skimming it from receipts Fraudulent disbursement Cash or goods can be stolen and used later for resale
Flags for the Government
Simple cash skim
Sales Suppression
Double tills Self-help phantom-ware Factory installed phantom-ware Zappers
Skimming cash sales – a very old tax fraud
The Evolution of The Skim
This is an old Zapper that’s been hard wired into the ECR.
This is a newer Zapper – it’s a removable device connected to the PC, not the ECR.
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reporting of losses or low income
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will be some specific pre-contact review done
reported income?
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estate holdings?
reported?
unreported income?
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dividend income consistent with reported income?
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sold?
properties?
from sales
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Examiners are advised to review external sources, including
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mark-up?
prices to reflect this, maintaining the same mark-up
properly reflected in the income/purchase numbers reported
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see if any of the following has been filed
Reports/8300s
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interview
accounts present?”
been raised yet
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summons will be used on third parties (ie. Banks)
are being uncooperative
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IRS Audits A CCH Seminar
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Estate of Mason v. Commissioner
deductible expenses – DiLeo v. Commissioner
that income is from non-taxable sources – Holland v. United States
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is just like real cash, except it’s not tangible
all examples of electronic money
access, and most importantly
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Examiner will seek to compare other data to gross receipts
to reported gross receipts
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May be reasons to ignore the 30-day letter and wait for the Notice of Deficiency (“90-day letter”)
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issues
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Dear Mr. _________: This is a Qualified Offer made pursuant to I.R.C. Sec. 7430(g). The taxpayer offers to settle for $_________.00 the proposed responsibility for her 2009 federal income tax return. This Offer shall remain open until the earliest of the date such offer is rejected, the date trial begins, or the 90th day hereafter in accordance with Treas. Reg. Sec. 301.7430-7. Thank you.
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Court
8.4.1.4, Revenue Procedure 87-24
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fraud?
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Affirmative Acts
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referral
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transaction
income
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Limitations
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The Non‐Filer who died without records The house flipper who paid cash The Day Care that did not respond The auditors that observed for 2 hours Dog Breeder
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Called by the court appointed administrator Man died in his 80s No children Has not filed in at least 15 years He has $5,000 in his back account and $20,000 in a safe
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Little went through the bank No credit cards No 1099s reported in the Wage & Earning Reports Created a 433‐A based on IRS standards and the expenses we know he spent
(mortgage, utilities, etc)
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We used that as his income, and increased it for the $25,000 cash hoard
spread evenly over 6 years
Prepared 6 years of federal income tax returns and 3 years of CT returns IRS Compliance/Vol. Disclosure is last 6 years, CT is 3 years
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Cohan Rule: When the TP establishes that the TP paid or incurred deductible
expenses but does not establish the amount of the deduction to which TP is entitled, TP may be entitled to estimate the amount allowable. Cohan v. Comm’r, 39 F.2d 540 (2d. Cir. 1930)
IRC § 7491(a) shifts burden of proof to IRS when the taxpayer Introduces
credible evidence with respect to any factual issue relevant to ascertaining the taxpayer’s liability and cooperates with the audit
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Section 274 prohibits claiming the following deductions unless substantiation
requirements are maintained: – Meals and entertainment – Travel – Gift Expenses – Listed Property Expenses
Why we use SmartVault – stuff is backed up in the cloud forever
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Exactly what the title says Received audit notice Reconstructed costs by before and after photos and searching Lowes and
Home Depot online for prices
Save as much of the expenses as possible IRS cannot give you zero when it is obvious you spent money (except or those
expenses where documentation is required)
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Daycare owner had a stroke Audit notice was not responded to Auditor took an industry standard (day cares get 30% of their payments by
credit card)
Took 1099‐K, assumed it was 30% and came up with $2 million in unreported
cash
75% civil fraud penalty and interest
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Daycares are licensed by the state – certain number of children Town has prints and layouts of the building Provided above plus proof of payments This day care is in an extremely wealthy area so parents just leave credit cards
Appeals agreed to a no‐change
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Shop open 6:00 am – 11:00 pm Audited Auditor shows up at 8:00 am and leaves at 11:00 am Comes up with 90% cash Projects this vs 1099‐K and comes up with $300,000 if income tax due with
penalties and interest
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Morning is bagels, newspapers, coffee (Cash) Lunch is slices, sandwiches, sodas (mix of cash and credit) Night is pizzas, salads, dinner platters, beer and wine (almost entirely credit) The vast majority of the dollars in are credit Observations are great but the auditor must observe the ENTIRE TIME,
Appeals reduced the liability to $8,900, no penalty
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Helpful, but Must be up to date Technology is changing everything Cash businesses are not really anymore
(cabs/uber/lyft, Pizza/slice, arcades/laundromats now have credit cards, etc)
119 Resolving Payroll Tax Debts
A Review of State & Federal Audit Techniques and How to Protect Your Clients
Early Bird ends 6/25 Midnight, then $149 We will walk you through how sales tax audits are done, the techniques used by the various states, and how practitioners can help protect their client from the
audit techniques used by the IRS auditors, so you get a well‐rounded review and comparison between the two approaches and what you need to know to help your client handle each type of audit.
CLICK HERE TO REGISTER NOW
Or copy and paste this link: https://taxrepllc.com/program‐ 20200630‐sales‐tax‐audits‐workshop/ Due to the in-depth nature of this workshop, attendance is limited to 100 attendees so all attendee questions can be answered.
new revenue stream outside of tax season. I got trained as a tax resolution specialist. I’ve been able to really grow my practice and help
now by $150,000 as a solo practitioner. Without TRN and Eric Green’s help, none of that would have been possible.” --Patrick Wanzer, CPA
representation practice after the course. Without any further advertising other than adding “IRS Representation Practice” to my sign, I added an immediate $18,000 to my billings on just a few client matters. Marketing to my own clients added more than $140,000 in income by the end of the first year! The workshop is straightforward and easy to follow, my only regret being that I did not do this sooner. Thank you!”
in financial planning and representation matters.
months for our Gold Level Membership (includes everything)
124 The Ultimate IRS Collection Workshop