Audit of Minister

[Unregistered]

A minister got an audit letter from IRS for 2004 & 2005. 2004 done by HRB. I did 2005.

Auditor disallowed Sch "C" expenses unless proven - Car expenses etc.

Total bill for both years - $38,000.

Is there any thing can be done. I am CPA and can represent him but he already talk to his "friend" - CPA/Attorney.

He came to me for helping him organize records etc. Willing to pay fees.

I like to take the opportunity to help him as I want to do representation in future. I do not have much much experience in it. My first classs shedule to start on Oct 3rd. But he needs help now.

Any input?

Thanks!

[Jiggers]

Audit Records

Why were the expenses disallowed? No receipts? No mileage records? Why?

Also, I suggest that you get the IRS MSSP for Ministers. It is a great help.

Did he get a W-2 for his services as minister or 1099? He should have received a W-2, with wages in Box 1 only. No SS or Medicare wages.

A $38,000 tax bill from an audit of two years is a lot. Must be a highly paid minister.

[Gretel]

We had this on the board several times.

Below is one link.

http://www.thetaxbook.com/forums/showthread.php?t=2480&highlight=audit

If you type "audit" in the search it will give you a list of threads, which contain the word audit.

Good luck.

[Unregistered]

Why were the expenses disallowed? No receipts? No mileage records? Why?

Also, I suggest that you get the IRS MSSP for Ministers. It is a great help.

Did he get a W-2 for his services as minister or 1099? He should have received a W-2, with wages in Box 1 only. No SS or Medicare wages.

A $38,000 tax bill from an audit of two years is a lot. Must be a highly paid minister.

He got W-2. Box 1 was proper.

It seems that he can not find mileage records. While preparing return, I told him that record is required. He assured me that he has receipts, records etc.

[Bird Legs]

Was Housing Allowance

included on the W-2? It should not have been if it was.
.

[Bucky]

First off why does he have Sch C. All that should be on a Sch C for a minister is misc income form weddings funeral etc. If he received W-2 did he have an accountable plan for business expenses. If yes then he would have very little to write off and it would go on 2106. If he did not have accountable plan all business expenses would go on 2106. These business expenses would also lower his SE tax even if he could not itemize. Ministers can be a real trip for several reasons. One, they usually have a member of church doing payroll etc and secondly the way they are paid and reimbursed is not always clear or done correctly.

Bucky