TaxEsqBlog -by Ronald J. Cappuccio, J.D., LL.M.(Tax)

IRS Audit Techniques Guides provide clues to what may come up if your business is audited IRS examiners use Audit Techniques Guides (ATGs) to prepare for audits — and so can small business owners. Many ATGs target specific industries, such as construction. Others address issues that frequently arise in audits, such as executive compensation and fringe benefits. These publications can provide valuable insights into issues that might surface if your business is audited. What do ATGs cover? The IRS compiles information obtained from past examinations of taxpayers and publishes its findings in ATGs. Typically, these publications explain: The nature of the industry or issue, Accounting methods commonly used in an industry, Relevant audit examination techniques, Common and industry-specific compliance issues, Business practices, Industry terminology, and Sample interview questions. By using a specific ATG, an examiner may, for example, be able to reconcile discrepancies...

The IRS is not calling to arrest you! Today, a new client appeared in my office and explained he needed a consultation right away.  This is very strange because most people call to set up an initial conference and we discuss the case on the telephone before meeting.  This man was middle-aged, dressed nicely, said he was an IT analyst, but was sweating and extremely nervous.  I asked him “what is wrong?”  He told me “the IRS called and said they had audited my tax returns, I owe a lot of money, and unless I contact the Restitution Department they are coming to arrest me.” I immediately told him this was a scam.  He was still very concerned.  So I asked him for the telephone number of the so called “IRS” and I called using my speaker phone.  The person answered “IRS Department.”  I immediately knew this was a scam because no one from the IRS answers stating the word “Department” because it is not.  The person was quite difficult to understa...

The IRS has finally announced that it will stop the automatic issuing of federal tax liens, levies and executions during the government shut down.  Unfortunately, many automatic levies have been issued by the IRS and there is no one in the IRS to talk to or negotiate with to set up installment agreements or take other actions to remove the levy.  This results in great hardship for taxpayers. The IRS has been issuing notices, some dated October 7, 2013, even though the office was to be shut down by October 1, 2013.  It is hard for me to believe that this was not designed to have maximum impact upon taxpayers.  In fact all the IRS services that normally assist taxpayers, whether its at a service center, or on the telephone, as well as the normal collection and auditing function, have been terminated during the shutdown.  This intentional design clearly is to put a maximum negative impact upon taxpayers. Because of the complaints, the IRS is now issued a revise...

The IRS is scaling back operations during the Government Shutdown These are the things to remember: 1. FILE all tax returns on time. 2. PAY all tax deposits and balances on time. For example, the October 15 extension date for filing Individual returns still applies. 3. The IRS computers will be generating notices, levies, and other tax actions and the websites should be working. 4. AUDITS will be delayed until after the shutdown. 5. Some COLLECTION activities will be delayed. 6. All TIME DEADLINES remain in effect. If you have a letter stating you must respond in 30 days, 90 days, etc, and you do not, you will lose your appeal rights when the IRS does reopen. Here is a good excerpt for RIA Checkpoint: Government shutdown forces IRS to scale back operations IRS has announced on its website (irs.gov/uac/Newsroom/IRS-Operations-During-The-Lapse-In-Appropriations) that its operations have been scaled back due to the government shutdown. However, it emphasized that taxpay...

The following are the latest items the IRS focuses on for Tax Audits: 1. Company Cars -  Employers frequently don't report the taxable benefit that employees receive from their personal use of company-owned cars. The IRS plans to focus on the use of company cars, especially "luxury" models, in its next series of audits.   2.   High Income Taxpayers -   The IRS will aggressively pursue self-employed taxpayers with gross income of more than $1 million. In 2011, the IRS audited 12.5 percent of all individuals with incomes of more than $1 million (up from 8.4 percent in 2010). These audits are frequently performed by the LB&I audit groups and are much more invasive than typical audits. These audits should always be fought with a tax attorney. 3.   Form 1099-K Matching -  Form 1099-K (credit card) matching payee statements with receipts will be the focus of small business auditing. This is the new "cash audit" program and will focus on restaurants and...

Even the the return is much greater for auditing large businesses, the IRS is focusing on auditing small businesses reports Atlantic Monthly . The reason is large firms have the resources to fight the IRS and drag on audits while smaller companies do not hire the tax attorneys needed and lack internal resources. The IRS finds it easier to pick on the "little guy."