Audit Envelope Are You Prepared on white paper an yellow envelope holding by human handsWhen a tax return has been selected for office examination, generally the examination of the return will be conducted at the office of the IRS.  Normally a taxpayer will find an office examination has begun when he or she has received a letter or telephone call from the IRS informing him of such examination and that the IRS wants further records and information. Returns selected for office examination present issues which require some analysis and judgment in addition to verification of records.
Continue Reading A Guide to Office Audits with the IRS

Midsection of tax auditor examining documents with magnifying glass at table in officeField examinations involve returns with more complex issues, thereby requiring examination by someone more knowledgeable in the field of accounting and the Internal Revenue laws.  Field examinations are conducted by Revenue Agents and are normally performed at the taxpayer’s place of business where the Revenue Agent can examine the taxpayer’s books and records and decide on the taxpayer’s correct taxable income and correct tax liability.  The Revenue Agent is supposed to make an appointment with the taxpayer at a time and place that will be convenient for the taxpayer.  The arrangement of the time and place can be done by telephone; however, the telephone contact cannot be used to verify items appearing on the income tax return.
Continue Reading Field Examinations with the IRS

USA patriotic American flag muscular arm flex adorned in red, white and blue stars and stripes, huge bicep, very cool symbol of fitness, pride, strength and motivation. Isolated vector illustration for easy editing.The battle outside ragin’

Will soon shake your windows

And rattle your walls

For the times they are a-changin’

-Bob Dylan

A change in presidential administrations brings with it the uncertainty of what the political, legal and tax landscape will look like in the future. Statements from the Commissioner of the Internal Revenue Service and the President of the United States are starting to provide clarity of what things will look like going forward.  Here’s what we know and what you, as a taxpayer, should be thinking about as you adjust your financial planning.
Continue Reading IRS Commissioner and President Biden Draw Battle Lines

Overview of the Appeals Process

The goal of the Appeals Office is to settle as many cases as possible within the broad guidelines of its Mission Statement:

The Appeals mission is to resolve tax controversies, without litigation, on a basis which is fair and impartial to both the Government and the taxpayer and in a manner that will enhance voluntary compliance and public confidence in the integrity and efficiency of the Service.

Even though much of the work of Appeals comes from examinations, its jurisdiction has expanded over the last few years.  In examination cases, the taxpayer receives the 30-day letter.  This letter is accompanied by the Revenue Agent Report and gives the taxpayer 30 days to request an Appeals conference.  In most cases, the taxpayer is required to file a protest describing the taxpayer’s position.  If the taxpayer does not request an Appeals conference, then the IRS will send the taxpayer a notice of deficiency.  If the taxpayer files a petition with the Tax Court, and has not had an Appeals conference, the IRS will send the case to Appeals to investigate a possible settlement.  In other types of cases, the IRS will send the taxpayer a letter advising the taxpayer of his right to an Appeals and giving the taxpayer a time limit in which to request an Appeals conference. You file the protest as stated in the letter from the IRS and within the 30-day period.


Continue Reading Going to Appeals – Preparing the Protest

Old axe standing against a piled pieces of firewood in wood“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”

― Abraham Lincoln

The Bipartisan Budget Act (BBA) was signed into law by President Barack Obama in 2015 and fundamentally changed the way partnerships are audited. Under the BBA, the IRS generally assesses and collects any understatement of tax (called an imputed underpayment) at the partnership level. The new rules were applicable to all entities starting on January 1, 2018, unless they are eligible to elect out. A significant uptick in BBA audits hasn’t, for the most part, occurred because of other demands on the IRS. However, a ramp up in BBA audits in 2021 is expected given IRS plans to increase audits on small businesses, usually operating as partnerships, by 50 percent.  Preparation prior to any audit is a good idea, but it is imperative for partnerships navigating new audit rules under BBA.  Here are some ways to sharpen your axe before the audit notice arrives.
Continue Reading Is Your Partnership IRS Audit Ready?

Midsection of tax auditor examining documents with magnifying glass at table in officeIf you haven’t read Part 1 of this blogpost, you might appreciate the background in that post.  That post dealt primarily with the concepts of communication during the audit. However, the concepts below should be helpful even without the benefit of Part 1. This post focuses on the concepts of preparation and presentation during the audit.   
Continue Reading Tips for Working with IRS Revenue Agents During an Audit – Part 2

Stamp IRS audit and accounting documents.Dealing with the Internal Revenue Service (IRS) is sometimes a difficult and complicated process. Even more so now given the pandemic.  Interactions with a Revenue Agent may not happen in person, but there will be contact with the IRS in some form. At times the procedure of communicating with the IRS is cumbersome, even for the most experienced tax practitioner.  Experience shows that a taxpayer can be successful in dealing with the IRS at all levels with proper communication, preparation and presentation. This post will occur in two parts, the first part will discuss communication and the second part will discuss preparation and presentation.
Continue Reading Tips for Working with IRS Revenue Agents During an Audit – Part 1