by Fresh Start Tax | Dec 10, 2012 | IRS Tax Audit
Have former IRS Agents and Managers who know the system keep IRS in check.
We have over 60 years of direct IRS work experience in the local, district and regional offices of the IRS.
Call us for a no cost consultation 1-866-700-1040. We are affordable and trustworthy.
On staff are former IRS Appeals Agents who have worked thousands of IRS tax audit cases.
Do not be alarmed if you have been audited by the IRS. If you have nothing to worry about it is okay that you go into the IRS on your own. If you have doubts call us and we will give you a free opinion on your individual case.
Facts and General Information about IRS Tax Audits:
- The IRS audits a total of 1,391,581 tax returns a year.
- The IRS field agents complete more than 310,000 audits by office or business visits a year.
- The IRS completes over 1,081,152 correspondence audits a year.
- IRS has installed new software tracking systems with the development of the CADE 2 computer to spot and recognize tax audits more proficiently
- There is a 1% chance you will get audited by the IRS
IRS Tax Audit
An IRS audit is a review or examination of an organization’s or individual’s accounts and financial information to ensure information is being reported correctly, according to the tax laws of the US to verify the amount of tax reported on the tax return is accurate and correct.
The IRS Publication 556, Examination of Returns, Appeal Rights and Claims for Refund explains the full tax audit process in much more detail.
The Tax Audit Selection Process
Selecting a tax return for audit does not always suggest that an error has been made. Returns are selected using a variety of methods, including:
1.Random selection and computer screening.
Sometimes returns are selected based solely on a statistical formula.
2. Document matching.
When payor records, such as Forms W-2 or Form 1099, don’t match the information reported. 1.3 million audits are conducted this way each and every year.
3. Related examinations.
Tax 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.Also other States may ask the IRS to look into tax issues and cases where they believe suspicious activity may be present.
While these are only three methods there are usually 12 different methods employed by the IRS to pull returns for audits.
Tax Audit Methods
An tax 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 the IRS select you for audit, you will be ONLY two ways you will be notified:
1. By mail or,
2. By telephone
In the case of a telephone contact, the IRS will still send a letter confirming the tax audit. E-mail notification is never used by the IRS.
Your Rights During an Audit
Publication 1, Your Rights as a Taxpayer, explains your rights as a taxpayer as well as the examination, appeal, collection, and refund processes.
These rights include:
a. A right to professional and courteous treatment by IRS employees,
b. A right to privacy and confidentiality about tax matters,
c. 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,
d. A right to representation, by oneself or an authorized representative,
e. A right to appeal disagreements, both within the IRS and before the courts.
Tax Audit Length
The length of each audit varies depending on the type of audit, the complexity of items being reviewed, the availability of information being requested, the availability of both parties for scheduling of meetings and your agreement or disagreement with the findings.
Tax Records Needed
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.
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 AGREE With The Audit Findings?
If you agree with the audit findings, you will be asked to sign the examination report or a similar form depending upon the type of audit conducted.
If money is owed, there are several payment options available. Publication 594, The IRS Collection process, explains the collection process in detail.
Fresh Start Tax LLC will work out a settlement agreement is you will owe funds to the IRS so do not be worried. We have settled thousands of cases since 1982.
What Happens When You DISAGREE with the 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 Tax Audits – Tax Audit Defense – Former IRS Managers, Agents – IRS Tax Audit Representation 1-866-700-1040
by Fresh Start Tax | Dec 5, 2012 | IRS Tax Audit
We are a professional tax firm that specializes in IRS tax issues and tax problems.
We have over 205 years of professional tax experience and over 60 years working directly for the internal Revenue Service.
If you have any questions regarding a IRS Tax Audit call us for a no cost professional tax consultation and speak directly to a tax professional.
There are several types of IRS tax audits.
1. Mismatches.
The most common type of IRS tax audit is the mail correspondence audit. IRS audits about 1.5 million taxpayers through mail correspondence. These usually occur as a result of 1099 and W-2 mismatches. The IRS collects billions of dollars a year on this type of tax audit.
Taxpayers should be aware that IRS matches up W-2’s and 1099 on each 1040. The CADE 2 computer system systemically does this.
2. DIF Scores.
The high DIF score is the second most common way IRS audits tax returns. The DIF score or the discriminatory index function score tax audit means your tax return fell out of the National Standards for various credits, expenses or something did not make sense on your tax return. Each tax return that registers a high DIF score is reviewed by a tax examiner for IRS audit potential.
The computer will self generate these scores and tax audits.
3. Random sample audit.
You won the IRS lottery and IRS will use your tax audit results to set up future DIF scores. A random sample audit means that the IRS will audit your whole tax return. THIS IS BAD NEWS.
4. National Program Audit.
IRS runs market specialization program in different areas in the country for different industries. IRS tries to audit all industries to set National Standards.
6. The Office Audit.
You will get a letter to appear in a local IRS office where a local office auditor will audit selected features of your tax return. These are small and quick tax audits. Many times IRS will audit up to 5 items om your tax return.
7. The Field Audit.
A more high skilled IRS Revenue Agent will spend days combing through your records. These are more advanced and complicated tax audits conduct at your home, place of business of at your representatives office. Many times these audits can last up to 40 hours.
If you have simple issues and you have nothing to worry about we recommend you handle the IRS tax audit yourself. If you have any skeletons in the closet make sure you are represented.
8. Referral audits. ( Collection Division )
As the IRS is completing a collection investigation the Revenue Officer will spot issues that will call for a closer look because of possible audit potential. Be friendly to the IRS agent.
9. Machine Generated IRS Audit.
This is a new type of tax audit whereas the IRS Cade 2 system pulls the return for a tax audit.
IRS TAX AUDITS – DIFFERENT TYPE OF IRS TAX AUDITS – TAX AUDIT DEFENSE – FORMER IRS
STOP THE WORRY TODAY, CONTACT 1-866-700-1040.
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 steve | Jan 12, 2012 | IRS Tax Audit
Did you recently get an IRS Tax Audit Notice? Not to worry!
If you have received an IRS tax audit notice, do not panic, this is not the end of the world. Fresh Start Tax has a combined 205 years of professional tax experience and over 60 years of working directly for the IRS in the local, district and regional offices of the IRS.
Persons receiving these tax audit notices are usually freaked out when calling our office. Just relax and take a deep breath, it is not going to be as bad as you think as long as a true tax professional is handling your case.
There are generally two types of IRS tax audits, office or field audits and mail correspondence audits.
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by steve | Jan 9, 2012 | Tax Lawyer
IRS has announced it’s new tax program for Offshore Bank Accounts.
After finding a goldmine in Offshore Accounts the IRS will continue to ramp up it’s program.
Here is how the process and the new program will work.
The overall penalty structure for the new program is the same for 2011, except for taxpayers in the highest penalty category. Off course IRS must modify the program.
For the new program, the penalty framework requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure.
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