by Fresh Start Tax | Nov 3, 2012 | IRS Tax Audit, IRS Tax Problem
We are Christian Tax Firm <>< specializing in all IRS and State Tax Matters.
We are staffed with Board Certified Tax Attorneys, CPA’s and Former IRS Agents and Managers all who practice their Christian faith.
Is your Church going through a IRS Tax Audit?
Call our Christian Tax Firm to get a free no cost initial consult 1-866-700-1040.
IRS Church Audit Process
The following is the sequence of the church audit process.
a. If the reasonable belief requirement is met, the IRS must begin an inquiry by providing a church with written notice containing an explanation of its concerns.
What is a reasonable basis per IRS:
The IRS may only initiate a church tax inquiry if the Director, Exempt Organizations Examinations, reasonably believes, based on a written statement of the facts and circumstances, that the organization, church or ministry :
(a) may not qualify for the exemption; or
(b) may not be paying tax on unrelated business or other taxable activity.
This reasonable belief must be based on facts and circumstances and always be recorded in writing. There are no witch hunts.
The IRS can obtain the information supporting a reasonable belief from various sources, including but not limited to:
a. Newspaper or magazine articles or ads,
b. Television and radio reports,
c. Internet web pages,
d. Voters guides created and or distributed by the church,
e. Documents on file with the IRS (e.g. a Form 990-T filed by the church), and
f. Records concerning the church in the possession of third parties or informants or others.
The IRS must derive the facts and circumstances forming the basis for a reasonable belief from information lawfully obtained. The IRS must be clear on their intent.
If this information is obtained from informants, it must not be known to be unreliable.You may question IRS regarding the source of the audit.
Failure of the church to respond to repeated IRS routine requests for information is a factor in determining if there is reasonable cause for commencing a church tax inquiry. Always comply with any request from the IRS.
Any church put on notice should always contact a tax professional.
Call us today, 1-866-700-1040.
b. The church is allowed a reasonable period in which to respond by furnishing a written explanation to alleviate IRS concerns.
c. If the church fails to respond within the required time, or if its response is not sufficient to alleviate IRS concerns, the IRS may, generally within 90 days, issue a second notice, informing the church of the need to examine its books and records.
d. After issuance of a second notice, but before commencement of an examination of its books and records, the church may request a conference with an IRS official to discuss IRS concerns.
The second notice will contain a copy of all documents collected or prepared by the IRS for use in the examination and subject to disclosure under the Freedom of Information Act, as supplemented by IRC section 6103 relating to disclosure and confidentiality of tax return information.
e. Examination of a church’s books and records must be completed within two years from the date of the second notice from the IRS.
If at any time during the inquiry process the church supplies information sufficient to alleviate the concerns of the IRS, the matter will be closed without examination of the church’s books and records.
There are additional safeguards for the protection of churches under Internal Revenue Code section 7611.
For example, the IRS cannot begin a subsequent examination of a church for a five-year period unless the previous examination resulted in a revocation, notice of deficiency of assessment, or a request for a significant change in church operations, including a significant change in accounting practices.
If you have any questions or need professional tax representation call us today to find out more. Blessings <><
IRS Audits, Churches, Ministries, Christian Tax Firm, Attorneys, CPA’s, Former IRS
by Fresh Start Tax | Oct 30, 2012 | IRS Representation, IRS Tax Audit, IRS Tax Problem, Representation, Sales Tax, Tax Help
IRS Tax Audit – IRS Representation Help – IRS & State Tax Representation
Have Former IRS Agents and Managers Represent you for an IRS Tax Audit
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Do not be fooled by other companies. Call us and speak directly to Former IRS Agents, Managers and Instructors who have over 60 years working directly for the IRS.
The odds of you getting audited by the IRS are about 1%.
IRS Audits 1.4 million tax returns each year. Rate of corporate returns being audited are far greater sometimes up to 10%.
The more money you make the greater likelihood your tax return will be audited.
If you need professional tax help to represent you on a individual or business tax audit call us today for the finest available Federal or State tax representation.
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IRS Tax or State Sales Tax Audits
Both government agencies can audit your tax return for a variety of reasons. As a general rule, the computer has selected your tax return for a tax audit.
The DIF Score, the main reason for tax audits.
Each tax return is issued a DIF Score (Discriminatory Index Function). According to the IRS and Former IRS agents who worked in the tax audit section, a DIF Score “is a mathematical technique used to score income tax returns for examination potential.
This technique establishes the National Average Guidelines.
If if your DIF score for your tax return is above the national average, then the risk of an audit escalates. The highest scoring tax returns are then forwarded to an IRS Examiner/ Agent for further review. All returns are manually screened.
So what triggers a high DIF Score?
Falling out of the National Average Guidelines in the areas of Charitable Contributions, Casualty Losses, Home Office, and Travel & Entertainment, excessive deductions and taking to many unauthorized tax credits will affect the tax return’s DIF Score.
How DIF Actually Works
To arrive at the DIF score for each tax return, the IRS computer identifies returns by assigning weights, algorithms and certain basic tax return characteristics.
These weights are added together to obtain a systemic composite score for all tax returns. That score is used to rank all returns into numerical sequence.
The highest scores are then manually reviewed by IRS Agents at the Service Centers to determine the merit and worthiness of a Tax Audit.
One Caution
You want to avoid IRS picking up multiple years during your tax audit. There are ways to prevent this action.
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by Fresh Start Tax | Oct 2, 2012 | IRS Tax Audit, Tax Problem Help
There is nothing worse than a letter from the IRS saying your tax return is selected for a IRS tax audit. After a couple moments of catching your breathe you start thinking are there any skeletons on that tax return and the thought of what else will the IRS find rifles through your mind. Will IRS audit more tax years and how much is this going to cost me are questions most taxpayers process.
The question you must ask yourself is this, “who do I really want to represent me ?”
If your tax return got audited in the first place why did my tax practitioner allow that IRS audit to happen, do I really what that same person to represent me.
We are a specialty tax firm dealing primarily with IRS problems. We have over 206 years of professional tax experience and over 60 years working directly with the IRS in the local, district and regional offices of the IRS. We are one of the premier firms for Tax Audit Defense.
Call us today to get a IRS perspective on your tax audit. We have former IRS Agents, Managers and Instructors represent you for a tax audit.
So, why was your tax return audited? Here are some of the most likely reasons.
How Are Tax Returns Selected For Examination?
The Internal Revenue Service examines (audits) tax returns to verify that the tax reported on the tax return is correct.
Some returns are selected for examination on the basis of the Discriminant Function System (DIF) score. Each return is given a (DIF) score by a complex computer program based on past information obtained by the IRS from specific examination programs The higher the score, the more likely that the tax return will be subject to audit.
The specifics of the DIF score program is not public, but certain items appear to cause a return to be selected for examination, such as participating in a tax shelter, large charitable contributions, home office deductions, casualty losses, large travel and entertainment expenses. These are the deductions most likely subject to abuse by taxpayers.
Other returns are selected under the Unreported Income DIF (UIDIF) score. This type of computer selection is based on the potential of the IRS finding unreported income on this type of selected tax return.
The specifics of this method of selecting a tax return for unreported income are not public, but certain information appear to cause a return to be selected for examination. Such information would include the occupation of the taxpayer and the type of business activity. potential exists as to omitted income.
After the tax returns has been has been selected under the DIF and UIDIF program, the tax returns are manually screened by an IRS employee known as a “classifier” in the Classification Section of an IRS Service Center.
This individual will review any attachments to the return and consider other data that a computer cannot detect. Finally, he will select the items on the tax return that will be examined.
Some tax returns are selected at random as part of tax compliance studies to update and reformulate its basis for audit selection formulas (DIF score) and is called the TCMP (taxpayer compliance measurement program).
This is in-depth audit where every item on the tax return is examined and the examiner must fill out an extensive questionnaire concerning each audit and the results. Based on these findings, the audit selection formula is adjusted to make it better in selecting tax returns for examination.
Still other tax returns are selected because payer reports of income, such as W-2’s or Form 1099’s do not mach the income reported on the tax return.
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.
From this information, the IRS will perform third party requests to obtain additional information before starting the audit. This type of audit will include the disclosure of foreign bank accounts and other sources of foreign income.
Other 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 examination.
Thus, if a partnership is examined, the partners will also be examined if the partnership is adjusted or the IRS wants to determine whether the partners are allowed the flow-thru losses. If a corporation is examined, the shareholders would also be examined to determine whether they received any distributions from the corporation.
Still others may be selected for examination based on newspaper articles, police arrests and grand jury investigations. A newspaper article might include information on an individual who embezzled funds from a client. The embezzled funds are taxable income and more likely these funds were not included as income on the tax return.
A person may be arrested for narcotics and the police find cash on him. This cash more likely than not represents omitted income.
Finally, a person may be selected for audit because of an informant. There is a federal program known as the IRS Whistle blower Office which pays money to people who blow the whistle on persons who fail to pay the tax that they owe.
If the IRS uses information provided by the whistle-blower, it can award the whistle-blower up to 30 percent of the additional tax, penalty and other amounts it collects.
Thus, a person could be audited based on the information provided by a business acquaintance, relative or even your former spouse!
by Fresh Start Tax | Sep 24, 2012 | IRS Tax Audit
As Former IRS Agents we have worked thousands of cases since 1982. After 60 years of combined experienced we can tell by looking at a tax return whether or not that tax return will be pulled for a tax audit.
We can actually audit proof your tax return. 1-866-700-1040.
While this is not a comprehensive guide you will find some indicators of what the IRS will look for in pulling your tax return for audit.
It is always helpful to file and honest and accurate tax return, if you do, you have absolutely nothing to worry about.
General Information – How to Avoid an IRS Tax Audit of your tax return.
How your tax return is processed thru the IRS audit system.
You should know all tax returns are input into the IRS CADE 2 computer system. This is the beast of IRS responsible for the fall of many. We all serve the BEAST.
1. Each line item of your tax return is punched into this system, line item by line item. A boring but necessary job!
2. Each line item is keyed into the gross income and net income to find ratios and percentages.
3. A statical relationship between income and expenses or deductions is formed and indexed into a DIF score. Each and every tax return get a DIF score.
4. From there, each tax return is indexed and given a DIF number. The DIF number becomes a key component to a IRS tax audit. Your DIF score is placed on a label permanently attached to your tax return. ( DIF Discriminatory Index Function )
5. A IRS Agent then manually reviews each tax return pulled by the computer DIF score and decides whether to pull the tax return for a IRS audit.
6. The IRS then selects the highest graded DIF scores region by region. IRS can determine how many tax returns gets audited based on region, sections in the country and available budgets and agents to conduct tax audits.
IRS Flags for Tax Audits
IRS conduct TCMP audits. A TCMP is a random selected tax audit. The process works like this, IRS pulls every 10,000th tax return for a random audit. From these random tax audits IRS can determine areas of tax abuse. These audits are a true pain in the ass. Each item on the tax return must have documentation, bills and receipts. IRS goes so far to ask for birth certificates. Tax practitioners call these tax audit, the audits from hell.
IRS Matching Program.
IRS matches all W-2’s and 1099s up with tax returns. If you have failed to claim a W-2 or 1099, IRS will pull your tax return for audit. These audits usually take place 1 to 2 years after the filing of the tax return. IRS audits 1.4 million tax returns per year via the matching program. Many of these are conducted through the mail.
Market Specialization
IRS has a market specialization program in which specially trained agents are experts in fields. These IRS experts have studied and have incredible market expertise in these particular areas of business. These Market Specialization audits cover all major areas of business, industries and professional markets. These are usually long and extensive tax audits.
High Income – Personal and business
As your income goes up, so does the likelihood that you’ll be audited. If you make more than a million dollars, your chances of being audited are over seven times higher than if you make less than $200,000.
Self-Employment
If you own a business or work for yourself, there are lots of expenses you can deduct, like work-related entertainment, travel, and equipment. Because the line between business and personal use can be crossed so easily, self-employed taxpayers are targeted more frequently for an audit.
If you claim complex or unusual expenses on your return, it’s wise to provide an explanation before the IRS has to ring you up and ask for one. Submit a note with your return explaining why you have an unusual situation or are missing a particular tax form, for instance.
Cash Businesses.
Just a quick note here, if you have a cash business, IRS has formulas worked out to discern if you are claim enough cash. Call us for more details.
FBAR Cases
FBAR tax audits are on the rise.
After 3 years of the IRS demanding FBAR filings, the IRS collected 5 Billion Dollars through FBAR filing and FBAR audits.
If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).
The FBAR is required because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions.
The FBAR is a tool to help the United States government identify persons who may be using foreign financial accounts to circumvent United States law. Investigators use FBARs to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad.
If you have a FBAR tax audit, hire a tax attorney, no exceptions.
To avoid a IRS tax audit, file accurate tax returns.
Call us today 1-866-700-1040.
by Fresh Start Tax | Sep 14, 2012 | IRS Tax Audit, Uncategorized
Tax Returns are audited by the IRS for different reasons. You can reduce the chance of a IRS tax audit by having tax professionals prepare your tax return.
As a Former IRS agent, I have observed thousands of tax returns. The basic rule used by the IRS is simply this, ” does the tax return make sense.”
The IRS DIF scoring is the main reason a tax return is sent to the field for a tax audit.
DIF Scoring
The IRS scores every tax return with a discriminate function (DIF) number. It is based on calculations the IRS uses to identify by classification all income and business tax returns with the highest likelihood of tax change on audit.
The DIF scores are tied into gross income vs deductions taken. If you fall out of the national averages the likelihood of a tax audit increases. Each tax return processed get assigned a DIF number. A IRS Tax Examiner, Tax Auditor or Revenue Agent manually reviews each tax return to ensure its worthiness of a IRS tax audit. We have on staff a former IRS reviewer.
Mathematical Corrections
The IRS processes all tax returns through there Master Computer System. Each tax return is input line item by line item by the IRS. The computer verifies the accuracy of the tax return. If there was a mathematical error, IRS will simply send out a tax adjustment and expect the adjustment notice if correct to be paid in full.
Income Document Matching – There are 1.4 million income tax returns audited via IDM
The IRS uses computers to find mismatches between names, social security numbers, 1099’s, earned income credits,withholding tax errors. IRS will simply send out a IRS notice or letter to advise the taxpayer of the mismatch. You have the opportunity to contact IRS if the information is incorrect. If you fail to respond to the IRS within the allotted time, IRS will make the adjustment to your return.
TCMP – Taxpayer Compliance Measurement Program
This type of tax audit is the most extensive by far, as it thoroughly examines tax returns line by line. This is called by practitioners the ” pain the butt tax audit or the tax audit from hell.” Every line item is audited by the IRS. This audit is conducted by the IRS to determine the areas of abuse. As a result of this type of tax audit, the IRS gathers the results and formulates areas of tax abuse.
Market Specialization Program
These are business tax audits where the IRS concentrates on a business industry.The IRS has trained agents to have an extensive knowledge about every aspect and have become industry experts in that field and are aware of tax avoidance issues.
The following is a short list of some of the industries with Market Specialization:
Aerospace Agency,
Architects and Landscapes,
Art Galleries , Attorneys, Lawyers,
Cash intensive, restaurants, beauty hair, laundry mats,
Child Care,
Insurance Industry
High Dollar Taxpayers.
Two other high target programs with the IRS are high dollar taxpayers and those taking tax credit deductions.
The odds of a IRS tax audit for High Dollar taxpayer is extremely high and for those taking tax deductions should be aware that IRS is placing indicators in CADE 2 to prevent tax abuse for erroneous tax credits.
If you need IRS tax audit help, call us today. 1-866-700-1040
by Fresh Start Tax | Sep 13, 2012 | IRS Tax Advice, IRS Tax Audit
IRS Tax Audit Help – Have Former IRS Agents Limit Your Exposure – IRS Tax Audit Experts – National Tax Experts 954-492-0088
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Why Taxpayers get audited.
The most frequent question I am asked as a former IRS Agent is this, ” How can I avoid a IRS Tax Audit”.
The answer to that is not so simple however I can tell you the most frequent way that IRS audits tax returns. It is through the DIF method. The DIF score is a numerical score placed on all tax returns. It lets the IRS know if you fall out of the normal ranges for different exemptions, deductions and tax credits.
IRS audits so many tax returns each year and that number is set by the annual budget and the amount of agents and funding available for IRS tax audits.
So, the DIF is a mathematical technique used to score income tax returns as to examination potential.
Under this concept, mathematical formulas are developed based on available taxpayer compliance measure programs data and are programmed into the computer.
The computer identifies returns by assigning weights to certain basic return characteristics.
These weights are added together to obtain a systemic composite score for each return processed.
This score is used to systemically rank the returns in numerical sequence (highest to lowest).
Generally, the higher the score the greater is the probability of significant tax change.
The highest scored returns are made available to Examination upon request.
DIF mathematical formulas are confidential in nature and are distributed to IRS personnel only on a need-to-know basis.
DIF formulas are for official use only and will not be discussed with unauthorized personnel.
If you are going to undergo a IRS tax audit, Call us today and get the IRS Tax Audit Help Free tax consultations. 1-866-700-1040.
