Tag Archive for irs audit

Am I At Risk For Being Audited?

Frank Hider, Tax Advisor, Dallas, TX, TaxConnections

Even though some IRS audits are chosen at random, there are a few factors that could put Texas taxpayers at an increased risk.

Taxpayers in Texas may understandably have a fear of being audited. After all, an Internal Revenue Service audit may be incredibly time-consuming and end in the consumer having to pay money to the government. However, that is not always the case. Read more

Steps to Avoid an IRS Worker Classification Audit

Any small business must hire more people as the business grows and thrives. At the initial stage when work is sporadic, it may make sense to hire contractors like a web designer to create an online presence or a bookkeeper to manage business accounts. But as work piles up, it may require hiring a full-time employee.

The line between independent contractor and employee is not always clear. A construction firm may have contracted with several roofers as projects dried up during the recession. As work picks up and the firm needs more help, several of the roofers may give up other jobs in exchange for steady schedules and access to the firm’s retirement savings plan. Does this mean that they should instead be classified as employees? Read more

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

Your Worst Nightmare: An IRS Audit

Your business is growing and you are prospering. Business is good. Life is good. Then the unbelievable happens, which turns your world upside down and pushes you into pure panic.

This panic mode is instantly brought on by receipt of an IRS audit letter.

Most of us don’t fear something exploding or catching on fire as much as we fear an IRS audit. Of course, the best way to survive a tax audit and even to come out of it successfully is not to panic, but to prepare.

Take it seriously.

Even though IRS audits are fairly routine events, they should be taken with the utmost Read more

Would Your Beauty Salon Business Survive An IRS Worker Classification Audit?

I do not know of any business owner who wants to be audited by the IRS or their state tax authority. Audits can be simply random as “decided” by the IRS computer, or they can be triggered by certain characteristics of your business operation, for example how you’ve classified independent contractors or employees (especially if they apply for unemployment insurance, worker’s compensation benefits, or even welfare).

Do You Operate A Beauty Salon?

Here are three key items the IRS and state tax authorities look for if you are an independent contractor or if you use them in your business.

1. Is there a lease between the independent contractor and the owner? Read more

3 Strategies For Getting Out Of IRS Audits

When faced with an IRS audit, an effective strategy can be the key to obtaining a favorable outcome for the taxpayer. Early in the audit process, the taxpayer or his or her qualified representative should consider the policy against repetitive examination, the IRS policy on reopening examinations, and the various statutes of limitations that apply to examination of the taxpayer’s records and books.

1. The IRS Policy Concerning Repetitive Examinations

An initial consideration is whether or not the taxpayer’s audit violates the IRS’s policy against repetitive examinations. The policy against repetitive examinations applies when the taxpayer has been audited in the past two years, and the audits resulted in essentially no change. If you are a taxpayer who has been audited once in the past two years and Read more

Zip It During A Tax Audit

TaxConnections Picture - Zipped Mouth ShutIf you chose to represent yourself in an Internal Revenue Service Examination realize the IRS Revenue Agent (RA) or Tax Compliance Officer (TCO) assigned to your file is trained very thoroughly to advocate on behalf of the United States Government. One method used quite often is to create a (false) sense of security in the personal interview setting or even on the phone with cathartic yet repetitive narratives. This is done in my humble opinion to lull you into a sense of complacency which subsequently if not held in check leads to providing responses way beyond the scope of the audit matters in question. More importantly when you talk too much you are creating opportunity for the RA or TCO to potentially broaden the authority of the audit should you happen to say something inadvertently that could appear circumspect.

When it comes to the actual audit process:

1. Recognize the IRS RA or TCO assigned your file is a person too who is just trying to do their job of advocating as aggressively as allowed by law on behalf of the US government and resist the urge to posture aggressively in response as it accomplishes very little to nothing and is generally futile. Most RAs and TCOs are reasonable and I’ll even go out on a limb saying that there even a few that are outstanding which can be a sincere blessing. If however you get an IRS RA or TCO that is a unilateral jackass – they do exist – this is where you need to focus on internalizing emotions and recognize you can request a different examiner. Read more

IRS Increases Estate Tax Audits

During 2012, the Internal Revenue Service Audited Estate tax returns in greater volumes than any other category of individual tax returns.

• The 2012 Internal Revenue Service Data Book showed that 29.9% of the 12,582 estate tax returns that were filed in 2011 were audited by the IRS.
The figure was a major rise from the 2010 per cent audit rate of 18.2%.
Estates with assets worth between USD 5 million and USD 10 million had a 58% audit rate.

Are You the Personal Representative of an Estate

Which Is Being Audited by the IRS?

Contact the Tax Lawyers at Marini & Associates, P.A.

for a FREE Tax Consultation connect with me on TaxConnections at:  Ronald Marini

It Has Been QUITE A Tax Season! A Review Of IRS Activity

According to the newly released 2012 IRS Data Book, the IRS collected almost $2.5 trillion in federal revenue and processed 237 million returns, of which almost 145 million were filed electronically. Out of the 146 million individual income tax returns filed, almost 81 percent were e-filed. More than 120 million individual income tax return filers received a tax refund, which totaled almost $322.7 billion. On average, the IRS spent 48 cents to collect $100 in tax revenue during the fiscal year, the lowest cost since 2008.

The IRS examined just under one percent of all tax returns filed and about one percent of all individual income tax returns during fiscal year 2012.  Of the 1.5 million individual tax returns examined, nearly 54,000 resulted in additional refunds.

An electronic version of the 2012 IRS Data Book can also be found on the Tax Stats and the following are some highlights worth noting.

In FY 2012, IRS initiated 5,125 criminal investigations.

In FY 2012, the IRS closed 60,793 applications for tax-exempt status and other determinations. Of those, the IRS approved tax-exempt status for 52,615 organizations. In FY 2012, the IRS recognized more than 1.6 million tax-exempt organizations and nonexempt charitable trusts.

In Fiscal Year 2012, General Counsel received 31,295 Tax Court cases involving a taxpayer contesting an IRS determination that he or she owed additional tax.

IRS workforce and the resources that the IRS spends to collect taxes and assist taxpayers. In Fiscal Year (FY) 2012, the IRS collected more than $2.5 trillion, incurring a cost of 48 cents, on average, to collect $100.

IRS’s actual expenditures in FY 2012 was less than $12.1 billion, which was used to meet the requirements of its three core operating appropriation budget activities.

In FY 2012, the IRS employed a total workforce of 97,941, including part-time and seasonal employees.

Are You an IRS Audit Target? Part I

The IRS said it audited more than 1 million individuals in fiscal 2012 for the sixth year in a row, collecting more than $50 billion for the third consecutive year. While those numbers might seem high, audit rates are really quite low. The IRS’ audit rate is roughly 1.03% of all tax returns filed.

The IRS generally has kept up its audit activity despite a $305,000,000 budget cut that reduced full-time staffing by 8% over the past two years, including 6% in the enforcement area over the past year. That 1.03% audit rate last year was almost double the level of a decade earlier.

Certain activities and behaviors can put you in greater danger of being Audited by the IRS.

High income is one. “Audits in the upper-income ranges remained substantially higher than other categories,” the IRS stated in a recent report. Of people with less than $200,000 in income, 0.94% faced an audit. That jumped to 12.14% of those earning at least $1 million.

Certain business categories are another. The IRS said it’s taking a closer look at “flow-through entities,” which include partnerships and Subchapter-S corporations. Audit rates in both areas have increased in recent years, though they both remain slightly lower than 0.5%.

Then there are big corporations. Of those with assets of at least $250,000, more than 29% got audited in fiscal 2012, which ended last Sept. 30.

Self-employed individuals who file Schedule C also face an elevated risk of audit. One curiosity: Those Schedule-C filers earning between $100,000 and $200,000 actually had worse odds, with 4.3% of returns audited, compared with those earning more money, where the audit rate was 3.8%.

The IRS has gotten more reward-focused about the taxpayers selected for audit.

“Like all smart businesses, the IRS wants to turn a profit these days,” according to a commentary by the National Association of Enrolled Agents, an organization of licensed of return-preparation specialists.“Currently, tax returns are selected for audit based on the chance that the IRS will find enough errors or missing income to generate additional taxes — and perhaps penalty and interest.”

We will continue this discussion in Are You an IRS Audit Target? Part II.

Are you Being Audited by the IRS?
Connect with the Tax Lawyers at Marini & Associates, P.A.
for a FREE Tax Consultation atRonald Marini
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