Audits on Police deductions.

[dmj4]

Finally, an audit of one of the tax preparers in my area that has been taking meals and mileage for police and firefighters, while they are on duty and driving the patrol cars, has happened. I have never been happy about an audit before. I am not happy that the TP got audited but I must admit that I am glad the preparer got caught. This preparer has been questioned many times about whether these deduction are allowed and this preparer continues to take them.

We have had discussions about this practice in the past. Some of us have spent a great deal of time explaining to police and firefighters why they can not take these deductions only to lose those clients to the greed, anyway.

The person who got audited said that the IRS told them they were looking at the preparer. The person audited called me because I did his taxes before he went to this person. He was told by all of the local police officers that he should go to this person due to the huge refunds and promise that they would pay half the tax if he got audited. Well, needless to say, nobody paid half of what he owed!

He said the IRS is going to audit many of that preparer's returns. At least 20% to start.

[Bees Knees]

They should audit 100% of his returns.

I remember something similar in our area way back when a husband and wife business could have one of the spouses treated as an employee, and the earnings were not subject to FICA. I think this was in the early 80’s. If you do that today, the earnings are not subject to FUTA but they are FICA taxable.

Well back then, just about every self employed person would try to treat their spouse as an employee so that you could cut your SE tax in half. Of course the rules were that the spouse be a bona fide employee; actually perform work; receive a paycheck; and be issued a W-2.

We had a tax preparer in our area that would just simply allocate half the income to the spouse and claim that personal expenses out of the checking account were considered half payments to the spouse since spouses are equally liable for their debts.

When one of his client’s got audited, the client told me that the auditor specifically asked if the tax preparer told him to do it that way. I think most of his client’s eventually were audited over the issue.

[JON]

Minnesota

The two most notorious "office audits"- green house Excelsior Blvd-across from Methodist Hospital-IRS closed that one down and the Stillwater, MN former IRS agent who determined deductions based on what he told clients the IRS would accept. He did a little time and had a following that got interviewed embarrased and penalized. Part of his followign were car salesmen-both of these were early 80's.

[tacks]

Good story, dmj4. It's nice to hear of shady preparers getting caught.

[JohnH]

That preparer should consider moving out of town, or else make sure he never gets caught speeding or breaking the law in any manner. He might find himself on the receiving end of a little "jailhouse justice" if the local police get their hands on him after their audits are finished.

[tacks]

Yeah, having a few beers at the local bar might not be a wise option for him.

[dsi]

The OP indicated that the local police new he was taking a risk on their behalf. Sounds like they need to go to jail as well?

[MLINDER42]

Police officers

Happened in my area a couple of years ago.I picked up two new clients.Never heard what became of preparer over 200 police officers where audited.Also happened to an Hrb preparer about five years ago he went to jail policemen paid large amounts back.

[Zee]

The OP indicated that the local police new he was taking a risk on their behalf. Sounds like they need to go to jail as well?

Good point. If the police we're aware that the deductions would be disallowed under audit, they're also guilty of tax fraud aren't they?

[JohnH]

I imagine any police officer knows how to avoid being tagged with criminal intent. Absent that element, it's extremely unlikely they'd ever get convicted of any kind of fraud. But I agree - surely most of them knew something was just not right about the whole situation.

[taxxcpa]

Police taxes

I had a police officer who rented an apartment in the city that employed him, but lived elsewhere. He wanted to deduct the rent since it was a requirement that he have a local address in order to hold his rank as Captain. I looked into it and found that it was not allowable, and when I told him he did not argue about it and did not take the deduction.

I suspected that he was not getting along with his wife and later they were divorced. His wife told me "buit we are still the best of friends."

[Snaggletooth]

BitterSweet

dmj4 - good to hear from you - we've missed you on the board.

This is almost too good to be true from my perspective. I have received two tickets in your town (where my son lives) from these local police. One of them I don't even think I was speeding, and the other one was an obvious revenue trap. Occurred on that big downhill east of town on Hwy 70 going down to the old drive-in theatre. Hard to slow down there, if you're moving at all you are very apt to exceed their 35 m.p.h. limit.

Also, there really needs to be more of this from the IRS. Many of us lose business to the guy across town because we won't take phony deductions and he will. This is where the real IRS enforcement money needs to be spent -- not in petty preparer penalties in cases where an EIC recipient couldn't have lived with his kids and no one really knows.

Glad to hear it - for more reasons than one...

[geekgirldany]

I had some firefighters that left me because I would not deduct their haircuts, meals, and gym memberships. They stayed with me for three years and I continued to argue each year with them. One told me that "so n so" said it was deductible. I told him that he is welcomed to get a second opinion somewhere else. Well the next year none of the firefighters came back and haven't been back. These are local guys.

My brother is a firefighter. I was talking to him about it and he said they just did not understand about the limitations. He said they believe they are getting back a big refund by claiming those deductions when it may only be a few dollars. He told me to tell them it was deductible and that most of them would always fall below the limitation so I had nothing to worry about. I told him I wasn't going to do that because one day they might actually be able to deduct it and go over the limitation.

I still have a couple of firefighters and police that don't balk when I say something is not deductible.

[OtisMozzetti]

penalties on the police

I would like to know that the police taxpayers are getting hit with penalties and interest, aside from the penalties on the preparer.

When that sort of penalties get assessed, it makes my argument that I can save clients money by avoiding the risk of penalties a more persuasive argument.

[OtisMozzetti]

Let's think about those meals of the firefighters

I had some firefighters that left me because I would not deduct their haircuts, meals, and gym memberships.
..

Let's think a little more about those meals of the firefighters. I frequently see fire engines pull up (sirens turned off) to the local grocery stores and some of the firefighters go in to buy a sack of groceries. So, if the local city or fire district requires the firefighters to eat their meals at the firehouse, ready to depart if necessary to a fire or other call for firefighter service, wouldn't the cost of those meals be a nontaxable employee benefit since it is very clearly for the convenience of the employer?

I am saying that if the city or the fire district reimburses whomever pays for the groceries, and those groceries are cooked up at the firehouse for the convenience of the employer, might not that be perfectly legitimate? I am really not sure about this...; I am just wondering...

Incidentally, at the place where I prepare tax returns, we essentially have to eat all of our "meals" in the back room of our office, in order that we can jump into action at any time when clients may walk in, or phone in, seeking our services. Again, I am just wondering...

EA in California