by Fresh Start Tax | Jan 14, 2014 | IRS Tax Audit, Tax Help
We are the Affordable choice!
Do not be in fear if you have just received a IRS Tax Audit Notice.
We are comprised of tax attorneys, certified public accountants and former IRS agents. We’ve been practicing in South Florida since 1982 in our A+ rated by the Better Business Bureau.
Our firm has over 206 years of professional tax experience right here in South Florida.
So,what is an IRS audit.
An IRS audit is a review or tax examination of an organization’s or individual’s accounts and financial information to ensure information is being reported correctly, according to the tax laws, to verify the amount of tax reported is accurate.
IRS Tax Publication 556, Examination of Returns, Appeal Rights and Claims for Refund explains the audit process in more detail. You can find that on line.
The IRS Tax Audit Selection Process
Selecting a tax return for IRS audit does not always suggest that an error has been made on the tax return.
Tax Returns are selected using a variety of methods, including:
1. Potential participants in abusive tax avoidance transactions.
Some returns are selected based on information obtained by the IRS through efforts to identify promoters and participants of abusive tax avoidance transactions. Examples include information received from “John Doe” summonses issued to credit card companies and businesses and participant lists from promoters ordered by the courts to be turned over to the IRS.
2. Random selection and computer screening – sometimes returns are selected based solely on a statistical formula. Each tax return receives a DIF score.
What’s the DIF and how does it apply to you?
The IRS says there are several ways a return can be selected for audit and the first is via the agency’s computer-scoring system known as Discriminant Information Function, or DIF.
The good old IRS evaluates tax returns based on IRS formulas, and DIF is based on deductions, credits and exemptions with norms for taxpayers in each of the income brackets.
The actual computer scoring formula to determine which tax returns are most likely to be in error is a closely guarded secret and only known by a select few.These are the types that would have to kill you than give up the info.
Experts believe one discriminant information function component looks at average deduction amounts.
This allows IRS examiners to spot inconsistencies, such as a high mortgage interest deduction and low income.
So what is likely to trigger a discriminant information function red flag?
1. Higher incomes.
2. Income other than basic wages; for example, contract payments.
3. Unreported income, such as investment returns.
4. Home-based businesses, especially when in addition to salary income, and home-office deductions.
5. Non-cash charitable deductions.
6. Large business meal and entertainment deductions.
7. Excessive business auto usage.
8. Losses from an activity that could be viewed as a hobby rather than a business.
9. Large casualty losses.
3. Document matching – when payor records, such as Forms W-2 or Form 1099, don’t match the information reported.This accounts for over $10 B a year for Uncle Sam.
4. Related examinations – returns may be selected for audit when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit.
IRS Tax Audit Methods
An audit may be conducted by mail or through an in-person interview and review of the taxpayer’s records.
The interview may be at an IRS office (office audit) or at the taxpayer’s home, place of business, or accountant’s office (field audit).
The IRS will tell you what records are needed. Audits can result in no changes or changes. Any proposed changes to your return will be explained.
IRS Tax Audit Notification
Should your account be selected for audit, you will be notified in two ways and only two ways:
1. mail, or
2. telephone
In the case of a telephone contact, the IRS will still send a letter confirming the audit.
Important Note – E-mail notification is not used by the IRS.
Your Tax Rights During an Audit, your Bill of Rights
Publication 1, Your Rights as a Taxpayer, explains your rights as a taxpayer as well as the examination, appeal, collection, and refund processes.
These tax rights include:
- A right to professional and courteous treatment by IRS employees.
- A right to privacy and confidentiality about tax matters.
- A right to know why the IRS is asking for information, how the IRS will use it and what will happen if the requested information is not provided.
- A right to representation, by oneself or an authorized representative.
- A right to appeal disagreements, both within the IRS and before the courts.
IRS Tax Audit Determinations
An audit can be concluded in three ways:
1. No change: an audit in which you have substantiated all of the items being reviewed and results in no changes.
2. Agreed: an audit where the IRS proposed changes and the taxpayer understands and agrees with the changes.
3. Disagreed: an audit where the IRS has proposed changes and the taxpayer understands, but disagrees with the changes.
What Happens When You DISAGREE with the IRS Tax Audit Findings?
A conference with a manager may be requested for further review of the issue or issues. In addition, Fast Track Mediation or an Appeal request may be filed.
IRS Audit Defense, IRS Audit Representation, Former IRS – Oakland Park, Wilton Manors, Tamarac, Lauderhill – Broward County, Florida
by Fresh Start Tax | Jan 14, 2014 | Tax Help
IRS Tax Representation by Affordable South Florida Tax Professionals
1% of all tax returns are audited, you won the IRS lottery. Do not be bullied by the IRS.
We are one South Florida’s most experienced, trusted and affordable professional tax firm specializing in IRS and State Tax Audits since 1982 right here in South Florida. We are a tax specialty firm.
We are a local South Florida tax firm that has been representing taxpayers in South Florida since 1982 for all IRS tax matters and IRS Audit defense.
We have over 60 years with the local IRS.
Our Professional Tax Staff
On staff are Former IRS Auditors, Audit Managers and Audit Instructors with a combined 60 years IRS work experience in the local South Florida IRS offices. While at the IRS we taught tax law.
We have worked as IRS auditors, IRS revenue agents, IRS appellate agents and IRS audit instructors all in the local South Florida IRS offices.
We know the tax audit systems
If you are going through an IRS tax audit there is no better tax representation than you can get the people who actually know the systems, the protocols in the settlement formulas.
We have worked hundreds upon hundreds of IRS tax audit cases including IRS audit defense, IRS audits of individual , business and corporate tax returns. We have done it all.
We are A+ rated by the Better Business Bureau.
Facts of Internal Revenue Service Tax Audits
The Internal Revenue Service audits 1.03% of all tax returns filed.
Playing the IRS lottery game, not a good idea.
I would not recommend you play the IRS lottery game because of your tax return falls out of the national standards you have an excellent chance of being audited by the Internal Revenue Service.
Nationwide, the IRS audits 1.5 million tax returns per year, that includes both field audits and IRS mail correspondence audits.
IRS Tax Audit Facts
1. 359,000 are actually audited by local IRS agents and rest are by mail or correspondence tax audits.
2. IRS collects $10.2 billion a year as a result of IRS audits by field agents and $5.2 billion a year by document matching programs.
3. IRS collects over $5 billion from the matching program alone.This program matches up W-2s and 1099′s.
Most Frequently Asked Questions by taxpayers
How far back can the IRS go to audit my return?
The IRS can include returns filed within the last three years in an audit.
Additional tax years can be added if a substantial error is identified.
If a substantial error is identified, the IRS will not go back more than the last six years. However , Tax Fraud however has no statute .
The IRS tries to audit tax returns as soon as possible after they are filed but because of back logs may audits start two years late.
How many audits are determined by the IRS budget.Each year Congress sets a budget and IRS must stay within their budget for tax audits as well as all other other programs
Question
Statute of Limitations on IRS Tax Audits?
If an audit is for an older year, you may be requested to extend the statute of limitations for assessment of your tax return.
The statute of limitations limits the time allowed to assess additional tax. If you do not sign the statute of limitations waiver IRS simply can set up a tax deficiency against any taxpayer Corporation.
The statute of limitations is generally three years after a return is due or was filed, whichever is later.
IRS Refund Statutes – There is also a statute of limitations for making refunds.
If the audit is not resolved and the statute of limitations date is nearing, you may be asked to extend the statute of limitations date.
This will allow you additional time to provide further documentation to support your position, request an appeal if you do not agree with the audit results, or to claim a tax refund or credit.
It also allows the IRS time to complete the audit and provides time to process the audit results.
You do not have to agree to extend the statute of limitations date.
However, if you do not agree, the examiner will be forced to make a determination based upon the information they currently have.
Therefore, the examiner may not be able to consider additional adjustments, such as expenses, that could lower the amount of tax due.
The IRS Tax Audit Selection Process, oh my.
Selecting a return for audit does not always suggest that an error has been made.
Question, why was my return selected?
Returns are selected using a variety of methods including:
- Random selection and computer screening , sometimes returns are selected based solely on a statistical formula.
- Document matching, when payor records, such as Forms W-2 or Form 1099, don’t match the information reported.
- Related examinations, returns may be selected for audit when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit.
- Sometimes tax returns are audited because spouses and ex-employees report findings to the Internal Revenue Service.
What records will I need to bring?
You will be provided with a written request from the IRS tax auditor for specific documents needed.They never will be sent by emails always snail mail..
Tax Records
Those records generally should be kept for three years from the date the tax return was filed.
The IRS does accept some electronic records. If records are kept electronically, the IRS may request those in lieu of or in addition to other types of records.
Contact your auditor to determine what can be accepted to ensure a software program is compatible with the IRS’s.
You do have IRS Appeal Rights
The IRS has an administrative appeals process that works with taxpayers to try to settle tax disputes in an effort to avoid formal court hearings.
You should always have a tax professional represent you during your appellate hearing. Here at fresh start tax we have former IRS appellate agents.
The role of Appeals is to make an independent review of a tax dispute and to consider the positions taken by both the taxpayer and the Service.
The IRS Appeals unit strives to resolve tax disputes in a fair way and remain impartial to both parties.
The IRS will send you a report and/or letter that will explain the proposed adjustments or proposed or taken collection action.
The letter also tells you of your right to request a conference with an Appeals or Settlement Officer, as well as how to make your request for a conference. In addition to examination adjustments, many other things can be appealed such as penalties, interest, trust fund recovery penalties, offers in compromise, liens, and levies.
If you request an Appeals conference, be prepared with records and documentation to support your position.
IRS Appeals conferences are informal meetings.
You may represent yourself or have an attorney, accountant, or an individual enrolled to practice before the IRS, represent you.
If you do not reach agreement with the Appeals or Settlement Officer, or you do not wish to appeal within the IRS, you may appeal certain actions through the courts.
After working for the Internal Revenue Service for a number years unless your tax return is squeaky clean would not recommend anyone represent themselves during an IRS tax audit. A good tax professionals firm will easily save you the money you spent for tax representation for IRS audit defense, IRS tax audit representation and any IRS help in general.
IRS Audit Defense, IRS Audit Representation = Tax Return Audits – Parkland, Plantation, Cooper City, Coconut Creek
by Fresh Start Tax | Jan 13, 2014 | Tax Help
As a former IRS agent I caution all my clients to be very careful in giving IRS a type of financial statement.
Most people dealing with the IRS collection division will be dealing with IRS tax forms 433-A, 433-F, or 433-B. These are all different types of IRS financial statements.
A word of Caution before giving IRS a Financial Statement
But before giving IRS owes financial statements I would caution or give you a warning that IRS will usually conduct an asset search to check out the credibility of both you and the financial statement that you sign under penalties of perjury.
I have looked over and reviewed thousands of these IRS financial statements as a former IRS agent and I can tell you that many people have simply not told the truth.
If you perjure yourself on that financial statement IRS has the right to proceed criminally against you
Some of the information that you should know is the following:
IRS conducts their own asset search within their CADE2 computer systems.
IRS also uses a search engine tool called ACCURIANT which pulls up information going back 10 years on taxpayers within there own systems.
Nowadays, revenue agents, auditors and revenue officer simply sit at their computer and can pull all the information they want right from the click of a finger.
Besides IRS conducting their own internal searches they will go ahead and Google your name and conduct asset searches from their desk and using the right search engines they can find out bunches of information.
You should also know that when you given IRS a financial statement whether it be a 433-A, 433-F, 433-B will have to provide complete documentation to support the financial statement.
IRS will want copies of bank statements, all expenses, contracts and pay stub information. Giving IRS a financial statement is serious business.
Always tell the truth.
The most common tools that IRS uses is pulling credit reports.
IRS will find out the income reported to credit agencies as well as the charging patterns and also the different credit cards that are used.
In cases in which the IRS expects fraud or perjury IRS may also summons for the financials statement that you turned in to third parties to purchase assets or to receive financing.
You want to make sure these IRS financial statements are matching up with those you have given third parties.
If they do not, you should contact a professional tax firm like ours before giving IRS a financial statement.
Some of the other assets that you will have to put on your financial statement and verifiable following:
Assets IRS will be asking about
- Cash and bank account balances
- Real property, including the value of land (can be main home, any additional home, or property held for
- Investment or used in a trade or business)
- Household goods and furnishings (for example, appliances, electronics, furniture, etc.)
- Investments in coins, stamps, paintings, or other collectibles
- Firearms, sports, photographic, and other hobby equipment
- Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts)
- Interest in a pension plan
- Interest in education accounts
- Cash value of life insurance
- Security deposits with landlords, utilities, and others
- Interests in partnerships
- Value of investment in a business
- Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds,
- commodity accounts, interests in hedge funds, and options)
It is always best to let true tax professionals handle and negotiate any IRS tax settlement or resolution.
We know the systems and the most affordable tax solutions to get your IRS case fully resolved.
IRS 433A, 433F, 433B – Warning – Let a Professional Prepare
by Fresh Start Tax | Jan 13, 2014 | Tax Help
IRS Canceled Debt – Income or Not Income
Canceled Debts Are Income!
Generally, if a debt for which you are personally liable is forgiven or discharged for less that the full amount owed, the debt is considered cancelled in whatever amount it remained unpaid. Generally, you must include the canceled debt is your income. However, under some circumstances, you may be able to exclude the cancelled debt as income.
The lending institution sends you a Form 1099-C to indicate the amount of debt they have canceled. This amount should be reported as ordinary income for the year of the Form 1099-C, unless an exception applied.
The most common exceptions to include the canceled debt in income are.
1. If you use the cash method of accounting, you do not realize income from the cancellation of debt if the payment of the debt on your part would have been a deductible expense.
2. If the debt is cancelled in a title 11 bankruptcy proceeding, but only if the debtor is under the jurisdiction of the court and the cancellation of the debt is granted by the court or occurs as a result of a plan approved by the court.
3. You do not include a canceled debt in income to the extent that you were insolvent immediately before the cancellation. You were insolvent immediately before the cancellation of the debt to the extent the total of all of your liabilities was more than the fair marked value of all of your assets immediately before the cancellation.
4. You do not include a canceled debt in income from qualified farm debt. Various specific requirements have to be met. Only applies to debt that is not discharged due to bankruptcy or insolvency.
5. Qualified principal residence indebtedness. Various specific requirements have to be met. Only applies to debt that is not discharged due to bankruptcy or insolvency.
A Form 982 is attached to the tax return to show the amount of canceled debt that is not included in gross income.
There may be situations where the Form 1099-C is sent by the lending institution for the wrong year. Thus, the debt may have been cancelled in a year for which the taxpayer’s assessment statute may have expired or the taxpayer was insolvent.
When a cancellation of debt situation arises, a tax professional should always be consulted.
IRS Canceled Debt – Income or Not Income – Ask Former IRS
by Fresh Start Tax | Jan 13, 2014 | Tax Help
IRS Tax Representation – Affordable Professionals
South Florida’s most experienced, trusted and affordable professional tax firm specializing in IRS and State Tax Audits since 1982 right here in South Florida.
We are a local South Florida tax firm that has been representing taxpayers in South Florida since 1982 for all IRS tax matters and IRS Audit defense.
Our Professional Tax Staff
On staff are Former IRS Auditors, Audit Managers and Audit Instructors with a combined 60 years IRS work experience in the local South Florida IRS offices.
We have worked as IRS auditors, IRS revenue agents, IRS appellate agents and IRS audit or instructors all in the South Florida IRS offices.
We taught Tax Law at the IRS in the South Florida IRS offices
If you are going through an IRS tax audit there is no better tax representation than you can get the people who actually know the systems, the protocols in the settlement formulas.
We have worked hundreds upon hundreds of IRS tax audit cases including IRS audit defense, IRS audits of individual , business and corporate tax returns
We are A+ rated by the Better Business Bureau.
We have a cumulative 206 years of professional tax experience and over 60 years of working right here in the South Florida IRS offices.
Facts of Internal Revenue Service Tax Audits
The Internal Revenue Service audits 1.03% of all tax returns filed.
Playing the IRS lottery game
I would not recommend you play the IRS lottery game because of your tax return falls out of the national standards you have an excellent chance of being audited by the Internal Revenue Service.
Nationwide, the IRS audits 1.5 million tax returns per year, that includes both field audits and IRS mail correspondence audits.
IRS Tax Audit Facts
1. 359,000 are actually audited by local IRS agents and rest are by mail or correspondence tax audits.
2. IRS collects $10.2 billion a year as a result of IRS audits by field agents and $5.2 billion a year by document matching programs.
3. IRS collects over $5 billion from the matching program alone.This program matches up W-2s and 1099’s.
Question, how far back will IRS go ?
- How far back can the IRS go to audit my return?
The IRS can include returns filed within the last three years in an audit.
Additional tax years can be added if a substantial error is identified.
If a substantial error is identified, the IRS will not go back more than the last six years. Fraud however has no statute .
The IRS tries to audit tax returns as soon as possible after they are filed.
Accordingly most audits will be of returns filed within the last two years.How many audits are determined by the IRS budget.
Question
- Statute of Limitations on IRS Tax Audits?
If an audit is for an older year, you may be requested to extend the statute of limitations for assessment of your tax return.
The statute of limitations limits the time allowed to assess additional tax.
The statute of limitations is generally three years after a return is due or was filed, whichever is later.
Question, could I get a refund
- Refund Statutes – There is also a statute of limitations for making refunds.
If the audit is not resolved and the statute of limitations date is nearing, you may be asked to extend the statute of limitations date.
This will allow you additional time to provide further documentation to support your position, request an appeal if you do not agree with the audit results, or to claim a tax refund or credit.
It also allows the IRS time to complete the audit and provides time to process the audit results.
You do not have to agree to extend the statute of limitations date.
However, if you do not agree, the examiner will be forced to make a determination based upon the information they currently have.
Therefore, the examiner may not be able to consider additional adjustments, such as expenses, that could lower the amount of tax due.
Question, what is the Selection Process
- The IRS Tax Audit Selection Process
Selecting a return for audit does not always suggest that an error has been made.
Question, why was my return selected?
- Returns are selected using a variety of methods including:
Random selection and computer screening , sometimes returns are selected based solely on a statistical formula.
Document matching, when payor records, such as Forms W-2 or Form 1099, don’t match the information reported.
Related examinations, returns may be selected for audit when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for audit.
Sometimes tax returns are audited because spouses and ex-employees report findings to the Internal Revenue Service.
Question, what records will I need to bring?
You will be provided with a written request for specific documents needed.
The law requires you to retain records used to prepare your return.
Those records generally should be kept for three years from the date the tax return was filed.
The IRS does accept some electronic records. If records are kept electronically, the IRS may request those in lieu of or in addition to other types of records.
Contact your auditor to determine what can be accepted to ensure a software program is compatible with the IRS’s.
Question, Are there Appeals ?
The IRS has an administrative appeals process that works with taxpayers to try to settle tax disputes in an effort to avoid formal court hearings.
The role of Appeals is to make an independent review of a tax dispute and to consider the positions taken by both the taxpayer and the Service. The Appeals unit strives to resolve tax disputes in a fair way and remain impartial to both parties.
The IRS will send you a report and/or letter that will explain the proposed adjustments or proposed or taken collection action.
The letter also tells you of your right to request a conference with an Appeals or Settlement Officer, as well as how to make your request for a conference. In addition to examination adjustments, many other things can be appealed such as penalties, interest, trust fund recovery penalties, offers in compromise, liens, and levies.
If you request an Appeals conference, be prepared with records and documentation to support your position.
Appeals conferences are informal meetings. You may represent yourself or have an attorney, accountant, or an individual enrolled to practice before the IRS, represent you.
If you do not reach agreement with the Appeals or Settlement Officer, or you do not wish to appeal within the IRS, you may appeal certain actions through the courts.
IRS – Audit Defense, IRS Audit Representation, Tax Return Audits, Pompano Beach, Deerfield, Boca Raton
