IRS Mail Audits Facts – Representation by Former IRS – Audited by the IRS

by Fresh Start Tax | Oct 29, 2013 | IRS Tax Audit

The Internal Revenue Service (IRS) estimates that $235 billion of the $450 billion in taxes that should have been reported and paid on time but were not is caused by individuals underreporting their income tax liabilities.
An audit is one of the primary enforcement tools the IRS uses to address the noncompliance that contributes to the Tax Gap, and the cornerstone of the IRS audit efforts is the correspondence audit program.
In Fiscal Years 2008 through 2012, IRS statistics show it conducted almost 5.7 million correspondence audits and recommended approximately $40.4 billion in additional taxes.
In Fiscal Years 2008 through 2012, IRS statistics show that it conducted almost 5.7 million correspondence audits and, in the process, recommended approximately $40.4 billion in additional taxes.
This represents about 77 percent of all audits the IRS conducted of individual income tax returns and about 56 percent of the estimated $72.4 billion in recommended additional taxes resulting from those audits.
The responsibility for conducting correspondence audits rests largely with the IRS’s Small Business/Self‑Employed (SB/SE) Division, which handles complex individual tax returns, and its Wage and Investment Division, which handles simple tax returns filed by individuals reporting wages, interest, dividends, and other investment income.
In contrast to the more detailed and lengthy face-to-face audit at an IRS office or in the field at a taxpayer’s place of business, the correspondence audit process is less intrusive, more automated, and conducted by examiners who are trained to deal with less complex tax issues.
Because of its automated features and less complex tax issues, the correspondence audit process enables the IRS to reach more taxpayers at a lower cost.
The IRS currently conducts correspondence audits in approximately 37 program areas.
Regardless of the program, the audit process typically begins with the IRS mailing a computer‑generated letter from one of its campuses to a taxpayer.
The letter outlines the examination process, identifies;

• one or more items on the tax return being questioned, and
• requests supporting information to resolve the questionable items.

 
Once the requested information is returned, examiners review it to determine whether it resolves the questions.
If the questions can be sufficiently answered by the information provided, the audit is generally closed without any changes to the tax; if not, the taxpayer is sent a letter requesting more information or indicating a recommended change to the tax.
The taxpayer at this point can do one of the following:
· Agree with the examiner.
· Provide the examiner with clarifying information.
· Appeal the decision to the IRS’s Office of Appeals.
In instances where the taxpayer does not respond to IRS letters, the examiner’s recommended tax changes are assessed by default and the taxpayer will generally have to petition the court system to contest the assessment.
If you need help regarding an IRS mail audit  situation contact us today and you can speak directly to tax attorneys, certified Public accounts, former IRS agents managers and tax instructors.
We are a nationwide tax firm with an A+ rating by the Better Business Bureau and have been in practice since 1982.
 
 IRS Mail Audits Facts – Representation by Former IRS – Audited by the IRS

IRS Process for a Tax Audit Selection – Former IRS Audit Selection Agents

by Fresh Start Tax | Oct 24, 2013 | IRS Tax Audit

IRS Process for a Tax Audit Selection
The Internal Revenue Service examines (audits) tax returns to verify that the tax reported on the tax return is correct.
There is a very specific process to make sure tax returns that need to be audited get to specific IRS audit agents.They will either go to the office auditor or to the IRS revenue Agent.
Agents are taken from various  local offices and sent to the Service Center for this audit  grading detail. These IRS audit agents spend a week to two weeks on this detail. They come from various offices.
Each tax return that is filed with the Internal Revenue Service is graded by the IRS Cade 2 computer.
Tax 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, and Offshore,FBAR banking issues.
These are the tax deductions most likely subject to abuse by taxpayers. IRS knows exactly where to look.
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 return has been has been selected under the DIF and UIDIF program, the tax returns are manually screened by an IRS employee known as a “audit classifier “ in the Classification Section of an IRS Service Center.
This IRS tax audit classifier is usually an experienced office auditor or revenue agent.
When the auditor arrives to the IRS campus or Service Center they go to an appointed desk  to process tax returns for audit consideration. There are two piles of tax returns that await.
One pile is for office audits ( simpler cases ) the other pile for revenue agents for field audits.( complex cases, businesses, partnerships, corporations )
For office audits, the selecting agent at the service center will circle the issues that the IRS auditor needs to address, if the case is going to a revenue agent (field agent) they will point out the one issue that is sticking out like a sore thumb. A lot of the cases that go to field agents are the issues of gross receipts. From there the cases go out to each local office.
Each IRS audit agent receiving the case can also chose other issues.
They also will review any attachments to the return and consider other data that a computer cannot detect.
Tax Return Selection – Other Information

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.
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 other tax returns may be selected for examination based on newspaper articles, police arrests and grand jury investigations.
Newspaper articles 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.
Many times a state agency may report to the Internal Revenue Service.
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!
If you are to undergo an IRS tax audit and need help contact us today.
We are a full service tax firm that specializes in IRS tax audits.
We are comprised of tax attorneys, certified public accountants, and former IRS agents.
Call us for free initial tax consultation.
 

IRS Tax Audit Statistics – How to pick effective Tax Representation for a IRS Tax Audit

by Fresh Start Tax | Oct 23, 2013 | IRS Tax Audit

IRS audit statistics pretty much stay the same every year. There are very few variances that occur from year to year but when they do they are attributed generally to the availability of funding from Congress to the Internal Revenue Service.
 
IRS Tax Audit Statistics
 

• The IRS audits about 1 percent of the individual tax returns.

• 143.4 million: Individual federal tax returns filed in 2011.

• 1.4 million: Individual tax returns examined by the IRS, resulting in notices being mailed or in-person audits.

• 90 percent: Tax returns audited in person resulting in a recommended change in taxes.

• 85 percent: Tax returns audited via mail resulting in a recommended change.

• $15.1 billion: Amount of recommended additional taxes from the audits.

• $16,851: Average recommended additional taxes per in-person audit.

• $8,241: Average recommended additional taxes per mail audit.

• Source: 2012 Internal Revenue Service Data Book

How to pick effective Tax Representation for a IRS Tax Audit
The three most important words to remember to find an effective tax representative for IRS tax audit is this: Experience, experience, experience.
If somebody is going ahead and represent your best interest for an IRS tax audit they should have represented hundreds of taxpayers in the past.
They should have an extensive knowledge of the tax code, your tax return, the issues at hand, have an understanding of the IRS processes and systems.
An effective IRS tax representative will understand the IRS settlement procedures, understand how to get your case through the IRS closing system fast, effectively, and with minimal cost.
They should understand the IRS hazards of litigation theories to understand how far they can take your case.
An IRS office auditor will conduct the tax audit at the local office while IRS revenue agent will handle more complex cases and those tax audits generally are at the place of business or at the tax professional’s office.
If you feel you have nothing to fear on your tax return you should feel free to represent yourself however if there are some issues you are not sure of it is always best to have a professional person handling your case, they will save you time, worry and lots of money.
Always check out the professional firm that will be doing your work along with the bios of the person that will be doing your IRS tax representation. In every single case check out the Better Business Bureau ratings and check to see if there are complaints on file.
Most credible companies will have an A+ rating by the BBB and their firm will have tax attorneys, CPAs, former IRS agents or enrolled agents handling your case.
At FST we have over 60 years of direct work experience at the Internal Revenue Service in the local, district, and regional tax offices of the Internal Revenue Service.
We are true tax experts for IRS tax audits.
 
IRS Tax Audit Statistics – How to pick effective Tax Representation for a IRS Tax Audit
 
 
 
You can call us today for free initial tax consultation we can review and assess your upcoming tax audit and lets you understand how IRS will view your return. Call us today for free tax consultation

IRS Audit Appeal – Former Appeals Agent – Miami, Ft.Lauderdale, Pompano, Boca, Palm Beaches

by Fresh Start Tax | Sep 11, 2013 | IRS Tax Audit

If you have just gone through a IRS audit and wish to appeal the results of your IRS audit contact us today so we can review the results of your case and go over tax strategies and opinions on how to be successful on the next level.
We are South Florida tax experts for the IRS on appeal. We are comprised of tax attorneys, certified public accountants, and former IRS agents and managers with over 60 years of working directly in the local, district, and regional tax offices of the Internal Revenue Service right here in South Florida.
Also on staff is a former IRS appeals agent of over 25 years. We are one of the most experienced tax firms in South Florida dealing with the IRS audit appeal system.
 

How to File a IRS Audit Appeal

 
Most differences can be settled within this system without going to court.
Reasons for disagreeing must come within the scope of tax laws, however.
A IRS Audit Appeal of a case cannot be based only on moral, religious, political, constitutional, conscientious, or similar grounds.
A case may be taken directly to tax court if the taxpayer does not want to appeal within the IRS. is best in each situation to go to the IRS audit appeal to understand the strategies in the reasoning of the Internal Revenue Service.
We never recommend any taxpayer go directly to tax court but the IRS audit appeal is the most logical and cost-effective  place to try to settle your differences.

Appeal Within the  Internal Revenue Service

 
The tax decision reached by the examiner may be appealed to a local appeals office, which is separate and independent of the IRS Office that conducted the examination.
An appeals office is the only level of appeal within the IRS.
IRS Conferences with appeals office personnel may be conducted in person, through correspondence, or by telephone with the taxpayer or its authorized representative.
Instructions for requesting a conference with an appeals officer are provided in the letter of proposed tax adjustment.
In FSLG, the Letter 950 is generally used to propose adjustments to employment taxes.  It states that to request a conference with an appeals officer, the taxpayer will need to file either a small case request or a formal written protest with the contact person named in the letter.
Whether you file a small case request or a formal written protest depends on several factors.
If a conference is requested the examiner will send the conference request letter to the appeals office to arrange for a conference at a convenient time and place.  The taxpayer or its qualified representative should be prepared to discuss all disputed issues at the conference.  Most differences are settled at this level.
Only attorneys, certified public accountants or enrolled agents are allowed to represent a taxpayer before Appeals.
 

Making a Small Case Request for a IRS Audit Appeal –  $25,000 or less. 

 
A small case request is appropriate if the total amount of tax, penalties, and interest for each tax period involved is $25,000 or less.
If more than one tax period is involved and any tax period exceeds the $25,000 threshold, a formal written protest for all periods involved must be filed.
The total amount includes the proposed increase or decrease in tax and penalties or claimed refund.
To make a small case request, the instructions in the letter of proposed tax adjustment provide that the taxpayer should send a brief written statement requesting an appeals conference and indicate the changes with which it does not agree with and the reasons it does not agree with them.
Be sure to send the protest within the time limit specified in the letter you received, which is generally 30 days. if the IRS does not receive your IRS audit appeal within the 30 days you lose your right to appeal with the Internal Revenue Service. It is very important you keep  mailed documents such as certified mail to prove your IRS audit appeal was sent out in a timely basis.

IRS Audit Appeal – Filing a Formal Protest

When a formal protest is required, it should be sent within the time limit specified in the letter.
The following should be provided in the protest:
1. Taxpayer’s name and address, and a daytime telephone number.
2. A statement that taxpayer wants to appeal the IRS findings to the Appeals Office.
3. A copy of the letter proposed tax adjustment.
4. The tax periods or years involved.
5. A list of the changes that the taxpayer does not agree with, and reason for disagreement.
6. The facts supporting the taxpayer’s position on any issue that it does not agree with.
7. The law or authority, if any, on which the taxpayer is relying.
8.The taxpayer must sign the written protest, stating that it is true, under the penalties of perjury as follows:
“Under the penalties of perjury, I declare that I examined the facts stated in this protest, including any accompanying documents, and, to the best of my knowledge and belief, they are true, correct, and complete.”
If the taxpayer’s representative prepares and signs the protest for the taxpayer, he or she must substitute a declaration stating:
That he or she submitted the protest and accompanying documents and;
Whether he or she knows personally that the facts stated in the protest and accompanying documents are true and correct.
 

The IRS may settle your IRS audit appeal dispute by using a method called the hazards of litigation

 
Example – You may be asking yourself just what are the hazards of litigation.
The Appeals Officer first reviews and evaluates the facts in the case, and the applicable statutes and legal precedents.
After considering all of these aspects, he or she will evaluate the “hazards” the government (IRS) will face in pursuing the case into the appropriate court.   If the Appeals Officer believes that the IRS may have a 30% chance of losing the case in trial, then she will entertain a settlement proposal whereby the taxpayer concedes 70% of the case.
Call us today for a free initial tax consultation and we will review your IRS audit appeal.
 

IRS Audit Appeal – Former Appeals Agent – Miami, Ft.Lauderdale, Pompano, Boca, Palm Beaches