CPA Joe Kristan tells us, one more time, why you should never use the sole proprietor form of business: A scary headline:  “Freelance? An IRS audit may be in your future.” A Tax Court case yesterday shows why a Schedule C on your return might interest the tax man. A New York City taxpayer filed [...]

Because in any given year the IRS is able to select for audit only a small percentage of tax returns, it employs a sophisticated system for choosing which returns to examine and which returns to accept as filed. The IRS assigns a numeric value to each tax return known as a DIF score. Returns with [...]

The Notice of Deficiency If you are audited and cannot come to an agreement with the examining agent, the IRS will issue what is known as a Notice of Deficiency (sometimes also called the 90 Day Letter). The Notice of Deficiency contains a calculation of the additional tax, interest and penalties the IRS believes you [...]

The Obama administration has said that it is dedicated to closing the tax gap i.e. the difference between what taxpayers should pay in taxes and what they actually do pay in taxes. The IRS estimates this number to be as high as $300 billion per year. The deficit is growing and it is more acceptable to the American [...]

An IRS audit is painful. Even if your return is 100% accurate and the IRS compliments you on your diligence and honesty, it will require a lot of your time and cause you a lot of stress. But there are things you can do to minimize the pain and the stress. Here are our top [...]

Every self-employed person or small business owner should keep their books using a reputable accounting software package such as Quickbooks or Quickbooks Pro. But even if you keep your records electronically, you still must have a system for retaining and organizing your underlying accounting records. Here is how we recommend our clients keep their records. [...]

If you have received a notice that the IRS wants to audit your tax returns, contact us for a free assessment of your areas of risk. If you choose to hire our firm to represent you in connection with an IRS audit, here is how we begin the process: What We Need from You Before [...]

If you receive an IRS audit notice, print this checklist out as a guide to help you through the process. Tax Return, Tax Preparer and Tax Records Carefully read the IRS Audit Notice and locate the list of items the IRS intends to examine Locate your copy of the tax return for the year that has been selected [...]

We have written extensively about the three Taxpayer Bills of Rights that have been signed into law in the last twenty years. This article carves out for discussion the applicable provisions of the Bills that apply to the IRS Audit process and grades the IRS’s performance with respect to each taxpayer right using the following [...]

The IRS has the legal right to audit any tax return it so chooses for any reason it chooses. The threat of an audit is what makes most taxpayers take seriously their obligation to comply with the letter of the law. The odds of being audited are generally very low, therefore, if you get an [...]