As published in the Winter Park/Maitland Observer, Thursday Jan. 3, 2012 Edition Offers... Read More »
Increased Audit Risk Accompanies Schedule C Filings
Joe Kristan reminds us once again of why you should not 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 a…
Read Full Article Categorized in: LLC's, S Corporations, Tax TipsTIGTA: Closely Held Businessmen More Likely to Structure Transactions to Avoid Taxes
The Treasury Inspector General for Tax Administration says the IRS needs to improve the quality of its audits of small corporations. Listen: TIGTA reviewed whether IRS examiners followed proper procedures and guidelines when auditing the returns of small corporations. The IRS defines small corporations as corporations with assets of less than $10 million. Many corporations in the…
Read Full Article Categorized in: Announcements, IRS Audits, S CorporationsIRS Continues to Battle Tax Refund Fraud
WebCPA reports that the IRS increased the number of fraudulent tax refund claims it detected and stopped during the 2011 tax-filing season by 171 percent over the previous year: As of April 30, 2011, the IRS had identified 775,723 tax returns with $4.6 billion claimed in fraudulent refunds and prevented the issuance of $4.4 billion,…
Read Full Article Categorized in: IRS Audits, IRS Procedure, Regulation of Tax Preparers, Tax CrimesIRS: No More Mister Nice Guy
The tax gap – the difference between what taxpayers’ should pay to the IRS every year and what they actually pay – is estimated to be about $300 billion a year. Karen Hube writing for the Washington Post confirms what we have reported here: The IRS is stepping up its enforcement activities (emphasis is mine):…
Read Full Article Categorized in: IRS Audits, Tax CollectionsN.J. Prisoner Pleads Guilty to Scheme to Defraud IRS
“The funny thing is, I was an honest man, straight as an arrow. I had to come to prison to be a crook.” - Andy Dufresne, Shawshank Redemption – WebCPA reports that an inmate in a New Jersey prison has pleaded guilty to bilking the IRS out of nearly $215,000 by filing false tax returns for his…
Read Full Article Categorized in: News, Tax CrimesBut We Need More Auditors
Joe Kristan tells of the case of Estate of Louise Paxton Gallagher, T.C. Memo. 2011-148 where the Tax Court made a valuation ruling more favorable to the taxpayer than what it had originally claimed on its tax return: The executor files an estate tax return valuing a 15% interest in an LLC at $34,936,000. The IRS audits the…
Read Full Article Categorized in: Court Cases, Estate Tax, IRS ProcedureTax Gap Closers Focus on Small Business
WebCPA reports that American small businesses are being disproportionately targeted as part of the Obama administration’s efforts to close the tax gap: Small businesses are disproportionately affected by measures to close the tax gap—the difference between taxes owed and taxes paid—according to a new study by the Small Business Administration’s Office of Advocacy The study,…
Read Full Article Categorized in: IRS Audits, Tax CollectionsIRS Audits of the Super-Rich Increase by 73%
This should make the class warfarists happy: According to the 2010 IRS Data Book released today IRS audits of the highest-income Americans (AGI >$10 million) increased 73.4% in FY 2010: AGI FY 2009 FY 2010 100k/200k 0.67% 0.71% 200k/500k 1.86% 1.92% 500k/1m 2.77% 3.37% 1m/5m 5.35% 6.67% 5m/10m 7.52% 11.55% >10m 10.60 18.38% The obvious question, of…
Read Full Article Categorized in: IRS Audits, NewsBasis Overstatements and the Statute of Limitations on Assessment
Paul Caron reports that the Fifth Circuit has now joined the Fourth and the Ninth in holding that the an overstatement of basis is not the same as an omission of income and, therefore, the extended statute of limitations on assessments (6 years instead of 3 years) that applies to income understatements does not apply to…
Read Full Article Categorized in: Court Cases, Statutes of LimitationIRS Audits: Why You Shouldn’t Represent Yourself
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…
Read Full Article Categorized in: IRS Audits, IRS Penalties, IRS ProcedureIRS is Auditing More Taxpayers; Hire a Reputable Preparer
The Associated Press reports that the IRS is intensifying and expanding its tax return audit program: The IRS is making it a bit riskier to cheat on your taxes. The tax agency increased the number of returns it audited by nearly 11 percent this year, statistics released Wednesday show. Wealthy taxpayers and big businesses were most likely to…
Read Full Article Categorized in: Individual Taxation, IRS Audits, IRS Penalties, IRS Procedure, Tax CrimesUrgency of IRS Notices
Wandering Tax Pro, Robert Flach, has some excellent advice that will save taxpayers and their representatives valuable time: If you receive any notice or correspondence from the Internal Revenue Service or a resident or non-resident state tax agency SEND IT TO YOUR TAX PROFESSIONAL IMMEDIATELY! And preferably send the original via postal mail – to…
Read Full Article Categorized in: IRS Procedure, Taxes 101TIGTA Message from Deputy Inspector General for Audit
Michael R. Phillips, TIGTA Deputy Inspector General for Audit, has issued a message to the public today regarding the challenges faced and initiatives to be implemented by the IRS in the coming year. Here are the highlights of Mr. Phillips’ message (emphasis is mine): Message from the Deputy Inspector General for Audit The IRS is focusing its…
Read Full Article Categorized in: IRS Procedure, NewsDon’t Blame Me, I Told you to Incorporate.
And we thought we had settled the issue of whether new business owners should incorporate, form an LLC or save a few hundred bucks and operate as a sole proprietorship. Today WebCPA reports that the IRS plans to fiurther intensify its audits of sole proprietorships (emphasis is mine): The Internal Revenue Service will be taking addit:ional steps to check on whether sole…
Read Full Article Categorized in: C Corporations, Corporate Tax, IRS Audits, Taxes 101IRS Cracking Down on Crooked Preparers
Tax law Professor and blogger Linda Beale today wrote exuberantly about the IRS’s crackdown on tax preparer abuse in Tax preparer — old abuses, new procedures. Here’s an excerpt: The days of just anyone becoming a tax return preparer and playing havoc with the rules, as some have, seem to be winding down. The courts, for one,…
Read Full Article Categorized in: Regulation of Tax Preparers, Tax Crimes