Notice of Audit for Self Employed

[S T]

Well worst nightmare, but been here before. Calif tax client - I am in NC

Notice of audit for Schedule C - Small contractor Thoughts are
submit the POA and a letter request to fax- or mail info or to transfer to a NC office


What are your professional thoughts - Following are the items listed

Request for Car and Truck Expenses - should not be a issue

Request for Supplies - should not be an issue - most all at one or two supply houses - No inventory - materials for jobs entered as Supply expense

Request for Travel Meals and Entertainment - Schedule C - well maybe an issue, but I believe the taxpayer can provide the documenation

Any thoughts for the first response to the 2014 Audit Request dated 5/23/2016??

Thanks

Sandy

[rkhan71]

Audit response info

Hi Sandy,

First response is of course to see if the audit can be transferred. And do not wait too long :-}

From IRS Website (although, I am sure you are well aware of the protocol) -

Where will the audit be held?
It depends on the type of audit being conducted.

Audits by Mail/Correspondence
Audit: Some audits are conducted entirely by mail. If the audit is conducted by mail, you will receive a letter from the IRS asking for additional information about certain items shown on the tax return such as income, expenses, and itemized deductions.
In-Person Audits are audits conducted either at a local IRS office or at your business location.

Can you request the audit be conducted at the IRS office instead of at your place of business?
If the audit has been scheduled to be conducted at your location, it will generally be conducted where the books and records are located. Requests to transfer the audit to another location, including an IRS office, will be considered but may not be granted. Treasury Regulation 301.7605-1(e), Time and place of audit, discusses the items considered when a request for a change in location is made.

Can the audit be transferred to another IRS office?
You can request a transfer of an audit if you have moved. Several factors will be considered such as your current location, the location of the business and where the books and records are maintained.
If the audit is by correspondence, you can request a face-to-face audit because the books and records may be too voluminous to mail.

See what happens after getting POA and discussing with auditor to see what the discussion pans out to be.

Good luck, Sandy

Ray

[Roland Slugg]

When one of my clients advises me of an audit notice, I discuss the issues with him and tell him what do send to the IRS. I'm assuming, of course, that yours is a desk/correspondence audit with just a few issues in question ... the ones you listed. There is no need for a POA, yet, and certainly no reason to request a transfer to another IRS office. Just help your client handle this himself.

[S T]

Thanks for info

Sandy

[Snaggletooth]

You Gotta Be Kidding!!

Just help your client handle this himself.

Sluggo, I can't believe you would do this. Handle an audit himself? This one may come down to a face-to-face, and he is expected to handle this himself? Sure, the guy is going to have to be responsible enough to gather up his receipts, but going against the IRS by himself is a lamb before the slaughter.

The fundamentals of why we are even in business get thrown out the window with this. If he can represent himself, why not just give up on doing taxes and tell him to buy TurboTax?

There has to be a "mollycoddle" factor for terrified clients when the IRS selects them for audit - whether in person or by computer. If we can't do this, we might as well not even roll over on the couch for them...

[S T]

Update

As a point of reference, I was successful in changing the audit from an office scheduled audit to a mail/correspondence audit.

Working closely with the Tax Client - small business contractor and gathering the required documentation. For what it is worth at this point the Auditor seems to be reasonable and we discussed what is needed - Her file copy does not contain a lot of the detail sheets that I complete for the tax return, so she appeared on the phone communication to be confused when reviewing the Schedule C. Just advised her that I would provide depreciation schedules, the vehicle sheets, etc that she was not provided with, and all should be more clear.

Guess a lot of our supporting statements are not transmitted or reviewed. That is unfortunate as they would be able to read them and have a clearer picture of how we try complete accurate tax returns.

Sandy

[mastertaxguy]

Consider getting a transcript or two...

As a point of reference, I was successful in changing the audit from an office scheduled audit to a mail/correspondence audit.

Working closely with the Tax Client - small business contractor and gathering the required documentation. For what it is worth at this point the Auditor seems to be reasonable and we discussed what is needed - Her file copy does not contain a lot of the detail sheets that I complete for the tax return, so she appeared on the phone communication to be confused when reviewing the Schedule C. Just advised her that I would provide depreciation schedules, the vehicle sheets, etc that she was not provided with, and all should be more clear.

Guess a lot of our supporting statements are not transmitted or reviewed. That is unfortunate as they would be able to read them and have a clearer picture of how we try complete accurate tax returns.

Sandy

Late to this party.

1. Consider obtaining IRS transcripts (return, account, and wage/earnings (w-2)) for the taxpayer for the years inquestion and maybe the year before and the year after. . While we all like to think we know our clients, and our clients love us and are honest with us, sometimes what IRS has is different than what the client tells us.

2. Always watch out for mileage for self employed. Add up all the mileage claimed in prior years (if using standard mileage) and compare with what the vehicle odometer shows now. If vehicles have been sold in the interium, a carfax (r) report may be illuminating.

3. Also, if you client has liablity insurance or worker's comp insurnace, ask for whatever the client has submitted to the insurance carriers regarding income, 'workers/independent contractors/employees,' expenses, vehicle mileage driven, etc.

[S T]

Thanks MasterTaxGuy

Long time client, yes there are some maybe "hidden" items - Vehicles should be fine - gathering the repair bills which are through the dealership for expenses and odometer readings - been on those vehicle audits before. Not standard mileage, but actual - so have most all receipts to subtantiate - I have the vehicle mileage verified submitted to Insurance and yes Insurance requested mileage useage - so think I am okay there

Travel, Meals and Entertainment are going to be the downside. Still trying to think about that - and how to present.

Contractor provides meals to approximately 3 employees at the job site, as it is NOT convenient for the 3 employees to leave and obtain meals in a 30 - 45 minute lunch break increment. However, the contractor/taxpayer is not great about the receipts - Is there a "diminimus rule" for these meals?

[New York Enrolled Agent]

Thanks MasterTaxGuy

Long time client, yes there are some maybe "hidden" items - Vehicles should be fine - gathering the repair bills which are through the dealership for expenses and odometer readings - been on those vehicle audits before. Not standard mileage, but actual - so have most all receipts to subtantiate - I have the vehicle mileage verified submitted to Insurance and yes Insurance requested mileage useage - so think I am okay there

Travel, Meals and Entertainment are going to be the downside. Still trying to think about that - and how to present.

Contractor provides meals to approximately 3 employees at the job site, as it is NOT convenient for the 3 employees to leave and obtain meals in a 30 - 45 minute lunch break increment. However, the contractor/taxpayer is not great about the receipts - Is there a "diminimus rule" for these meals?

No problem with writing the meals off - I simply presume the value of the meals was included in the employee's compensation. 😃