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Tag Archive for audit

Trump’s NOL And The Complexity Of Taxation

Annette Nellen

Lots of news stories and excitement over the first page of three of Trump’s state tax returns for 1995 (NY, NJ and CT)! The New York Times broke the story: “Donald Trump Tax Records Show He Could Have Avoided Taxes for Nearly Two Decades, The Times Found,” New York Times, 10/1/16. It’s a big NOL carryover – over $916 million (almost $1 billion). Several observations:

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What Are The Chances You Will Face An IRS Audit?

Ronald Marini

After much worry and angst you successfully met the filing deadline for your tax return. Now you are obsessing about a new worry: Will that return be audited by the IRS?

Almost everyone dreads the thought of an IRS audit but thanks to continuing Congressional cuts in the IRS budget, fewer and fewer Americans will face an audit of their return. For the 83% of Read more

IRS Issues IPUs For CFCs & Subpart F Income, Which State Their Subpart F Audit Positions!

Ronald Marini picture30

On October 13, 2015 we posted LB&I Agents Lose Autonomy To Centralized Office That Will Be Using Data to Identify Compliance Risks For Audit!, where we discussed that tax practitioners will face new questions from examination teams as the IRS selects compliance risks based on data, in the Large Business and International Division’s (LB&I) move from individual audits of multinationals to broader considerations involving risk assessment.

While LB&I is scheduled to implement the new structure in early calendar year 2016, in recently released new International Practice Units (IPUs), the IRS has provided additional guidance to its examiners on the audit of foreign base company sales income (FBCSI), a category of subpart F income. These IPUs focus on supply chain structures with foreign sales and/or manufacturing branches (including disregarded entities) that may be used by U.S. multinationals to avoid the application of the FBCSI rules. Read more

IRS Has NOW Been Given the Power to Improve its Partnership Audit Efficiency!

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The Government Accounting Office (GAO) released it’s report GAO-14-732: on September 18, 2014 indicating that the IRS needs to improve its audit and efficiency of partnerships.

What GAO Found

The number of large partnerships has more than tripled to 10,099 from tax year 2002 to 2011. Almost two-thirds of large partnerships had more than 1,000 direct and indirect partners, had six or more tiers and/or self reported being in the finance and insurance sector, with many being investment funds.

Historically the Internal Revenue Service (IRS) audited few large partnerships. Most audits resulted in no change to the partnership’s return and the aggregate change was small. Read more

5 Common Myths About The Dreaded Tax Audit

C

Filing taxes is punishment enough without the vague threat of an IRS audit looming over our heads. For understandable reasons, the IRS insists on keeping the ins and outs of its auditing process on the murky side. How will you catch the bad guys if you give them the rule book first? But because of the sense of mystery around the process, it’s an area of regulation often misunderstood by taxpayers.

Here are a few common myths about the dreaded tax audit:

Myth #1: Only the wealthy get audited.

While it’s true that big businesses and the uber-rich are often targets of IRS tax probes, that doesn’t necessarily mean low- and middle-income workers are free and clear. The Read more

Read This Before Tossing Old Tax Records

A batch of folders with a wastebasket on the white background.

Article Highlights:

• Reasons to Keep Records
• Statute of Limitations
• Maintaining Record of Asset Basis

Now that your taxes have been completed for 2014, you are probably wondering what old records can be discarded. If you are like most taxpayers, you have records from years ago that you are afraid to throw away. It would be helpful to understand why the records must be kept in the first place.

Generally, we keep tax records for two basic reasons: (1) in case the IRS or a state agency Read more

What Is The Statute of Limitations On An IRS Audit?

3d person watching a word "aduit" with a magnifying glass
The Statute of Limitations on an IRS Audit

Generally, the IRS can include returns filed within the last three years in an audit.  According to information contained on the IRS website, the IRS tries to audit tax returns as soon as possible after they are filed. This means that most IRS audits will be of returns filed within the last two years.

The IRS can choose to add additional years to an audit if a substantial error is identified.  In those cases, the IRS will not go back more than the last six years.

How Long Do I Have to Claim a Refund?

Just as the IRS must audit a tax return within a certain period of time, taxpayers also have Read more

If The IRS Sends You A Bill That You Can’t Pay… Please Don’t Have A Heart Attack!

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A few years ago, a client came to me almost at the point of a nervous breakdown. He had been recently audited by the IRS and subsequently received a tax bill in the mail for over $180,000! After briefly perusing the documents he brought in, I quickly realized that something was significantly amiss with this tax bill. So I advised him not to panic, but to leave his documents with me. After comparing the audit adjustments with his documents, I decided that we had to go and pay the IRS a visit.

A couple weeks later, we were sitting down with the officer who had conducted the audit and his manager, and after reviewing the audit adjustments together, the amount originally assessed was eventually cut in half. The audit officer, who appeared to be a rookie, had apparently done a very poor job. Read more

What To Do When You Get An IRS Audit Letter

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A thick white envelope with a logo that looks like a yeti is scratching the top of a scale while a leaf floats through the scene arrives in your mailbox and frankly, you’re scared. That logo only means one thing: a letter from the IRS. And once you open the letter, you’re even more freaked out, because it’s an audit letter from the IRS that frankly, you don’t quite understand. Yikes So what do you do?

Here’s a quick checklist of how to survive your IRS audit letter:

First: Don’t Panic

Take a deep breath. Getting hysterical and angry is a rational response to upsetting news, but an audit doesn’t mean you’ve done anything wrong. It simply means the IRS wants to Read more

IRS Issues Guidance on Estate-Gift Tax Pre-Appeals Conference Procedures

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IRS’s Small Business/Self-Employed (SB/SE) Division has issued interim guidance to its estate and gift tax auditors on procedures to use in connection with a taxpayer whose estate tax, gift tax, generation-skipping transfer tax, fiduciary income tax, or information return is being examined by estate/gift tax auditors, being eligible for an IRS Appeals conference.

After an IRS auditor completes an examination of a taxpayer’s tax return with respect to which the auditor wishes to propose adjustments, IRS provides the taxpayer a letter, a “30-day letter,” together with a computation report of proposed adjustments to the tax return. Read more

A Foot Massage More Painful Than Acupuncture

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A Lowell chiropractor was recently sentenced in federal court in the District of Massachusetts for bribing an IRS agent.

Stephen Jacobs, age 56, was sentenced by U.S. District Court Judge William G. Young to nine months in prison and ordered to pay a fine of $ 10,000.

In October 2014, Mr. Jacobs pleaded guilty to bribery of a public official. According to the indictment, Mr. Jacobs met with an IRS auditor back in August of 2013 to answer questions pertaining to his 2011 federal income tax returns.

During the interview, the examiner asked Mr. Jacobs about two deductions that he had claimed for tax year 2011 – each in the amount of $ 5,000. Mr. Jacobs admitted to paying Read more

Walking On Eggshells, Episode II: Attack Of The Fraud Examiners

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When we last left our anthropomorphic friends (see video below), Rigby was in a serious coma due to an allergic reaction from the eggs in the Eggscelent omelet, and doctors were not optimistic about his chances. Meanwhile, Mordecai discovered a long-lost journal from a former park employee that may hold the key to winning the challenge and the coveted trucker’s hat.

More to the point, when we last left our anonymous CFO and the company’s intrepid legal team, they were preparing for an “eggshell audit” from a government investigator. A Kovel Agreement can encourage open dialogue between professionals by expanding the attorney-client privilege, and there are certain things that government auditors can and cannot do. But what exactly are they looking for when they arrive? And how can you be ready? Read more

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