audit question

[JenMO]

Client has a correspondence audit. IRS is questioning deductions on a Sch C. Previous preparer made several mistakes - took deductions that weren't allowable, etc. - those being questioned. I've answered audit, explained the circumstances, they replied with an answer that nothing we sent in explained what they were asking for. ( Sent in lots of documentation for expenses that would have been allowable)
I think the whole Sch C is wrong, and all should have been reported on Sch A and 2106. I explained in the letter, but seemed to be ignored. If we accept their findings, pay the amount due, then can I amend and file the Sch A as it should have been? didn't know if you could amend an audited return? and if it would be accepted.
We know he owes, but if figures are put in the correct place, he won't owe as much.

[rkhan71]

My take

If findings of audit show that you agree with it, then go ahead and pay. If you disagree with the findings, that will be a different story. Obviously. -:} Is the IRS ignoring them altogether? If so, you may have to appeal for a Schedule A defense. That would be your fight for your client. Which sounds like what you are saying. Do not agree with the audit (do not sign) and appeal to a Schedule A items defense, because it sounds like they are ignoring deductions altogether. But check also how many dollars we are talking about here. Will it be worth the labor hours involved. Just a thought.

Good luck...

[JenMO]

there is about $3000 difference in what they are proposing and what we are. We would like to claim preparer fault, but I'm not sure if possible or ethical, or if would help. We are sending in a different letter, a little different explanation, and some more documentation. Maybe someone else will look at? right now, I have little time and would like to buy some time by not agreeing to their findings.

[rkhan71]

Appeals and_or...

I do not think (knee-jerk reaction) that preparar fault is an issue (not saying that there is not responsibility though); only for penalty abatement purposes probably. If the client owes money after the facts, then he/she can ask for abatement for the penalty - "reasonable cause." For now, I think you may have to look at what had been reported and what is correct and send in the detail, as you have have done so already. If the IRS does not agree with your findings and "correct" submission, you should then appeal. If monies are owed, client would have to pay the monies due. As said though, penalties may be avoided, possibly, for advice from the accountant / preparer on prep of return. But you can turn them into appropriate department / division (state authority or IRS). If you are able to appeal, it will buy some time. But you have to disagree with the IRS, if applicable, within the 30 day window.


:}

Ray

[Jiggers]

I agree that whatever the preparer did has no bearing other than penalty abatement. If something was deducted incorrectly, the taxpayer is responsible. There is no getting out of any tax liability because of what the previous preparer did.

[JenMO]

I agree, and he does too, he realizes what was done incorrectly and is willing to pay what he owes. last letter they gave us a 15 day window. I faxed a different worded letter last night with some of the same documentation. Hopefully they will look a little closer at the documentation since we didn't just fold and pay what they said. At least gives me time to get out of tax season.