audit without representation

[dmj4]

I have a client who did not file his 2000, 2001 and 2002 tax returns. He thought he had filed them because he signed joint tax returns every year. He works out of town so he trusted his girlfriend to mail them. His now ex-girlfriend did not mail them. She had convinced him that they were common law spouses. She filed her own returns without him. I'm sure she filed HoH and got EIC on both of their children. She is now accused of embezzlement from a company she worked for. They have now parted ways. In 2004 he received a letter from the IRS about the delinquent returns. They had created returns for him based on his 1099's, and sent him a bill. He contacted me and we filed the returns for those years. He mailed those in a few monts ago.

He signed a POA listing 2000, 2001, and 2002. About a month ago he was contacted by the IRS for an audit of 2003. Did he contact me, no. There was no POA for 2003. They asked for his 2001, 2002, and 2004 copies and he took them.

When his ex-girlfriend hid or destroyed the tax returns he thought he was filing, she also hid or destroyed his mileage logs for those years. I have been instructing him to keep mileage logs. I had warned him when we filed the late returns that he had better be sure to have proof of those miles.

The auditor disallowed his mileage deduction based on no logs. She allowed him a minimal amount of milege per week, according to him. He called me today and told me all of this. He showed her all of his motel bills and told her there was no way he could drive from X to X on that minimal mileage.

If he didn't sign anything, what would be the chances of getting the auditor to allow recreation of that mileage? He does have the motel bills that show where he was working. He does not stay in one place for more than a few days. Is there anything wriiten that addresses recreation of expenses?

[Armando Beaujolais]

I have a client who did not file his 2000, 2001 and 2002 tax returns. He thought he had filed them because he signed joint tax returns every year. He works out of town so he trusted his girlfriend to mail them. His now ex-girlfriend did not mail them. She had convinced him that they were common law spouses. She filed her own returns without him. I'm sure she filed HoH and got EIC on both of their children. She is now accused of embezzlement from a company she worked for. They have now parted ways. In 2004 he received a letter from the IRS about the delinquent returns. They had created returns for him based on his 1099's, and sent him a bill. He contacted me and we filed the returns for those years. He mailed those in a few monts ago.

He signed a POA listing 2000, 2001, and 2002. About a month ago he was contacted by the IRS for an audit of 2003. Did he contact me, no. There was no POA for 2003. They asked for his 2001, 2002, and 2004 copies and he took them.

When his ex-girlfriend hid or destroyed the tax returns he thought he was filing, she also hid or destroyed his mileage logs for those years. I have been instructing him to keep mileage logs. I had warned him when we filed the late returns that he had better be sure to have proof of those miles.

The auditor disallowed his mileage deduction based on no logs. She allowed him a minimal amount of milege per week, according to him. He called me today and told me all of this. He showed her all of his motel bills and told her there was no way he could drive from X to X on that minimal mileage.

If he didn't sign anything, what would be the chances of getting the auditor to allow recreation of that mileage? He does have the motel bills that show where he was working. He does not stay in one place for more than a few days. Is there anything wriiten that addresses recreation of expenses?

I'm afraid this is another "It Doesn't Add Up" alert.

What possible motivation would this apparently terrible person have to convince the poor taxpayer that they were married filing jointly? If she could file HoH and claim EIC, why not just do that instead of embarking on an elaborate scheme? If he made estimated tax payments on his self-employment income, he still gets those amounts.

[dmj4]

More to the story

I'm thinking of just washing my hands of this client. I called the IRS and they have put a lien on this client. It is based on the two returns that were filed late. The audit has not been heard from. He sent both those late return in and did not pay a dime with them. I had advised him to pay them in full. One of the returns only showed a balance due of $155, he did not even pay that! The other had a balance due of $7900. I am amazed that someone who had avoided a levy, because I called and told them that the returns would be forthcoming, would have the nerve to send in returns without at least paying that small one and the most he could send on the larger one.

Of course, he has told me that he chooses to be compliant, it doesn't sound like it to me.

Under the circumstances would you even consider trying to negotiate the re-creation of mileage?

I guess I am just angry at him right now for not doing what I told him, then he calls me when he gets multiple tax lien letters.

[dmj4]

I agree, he says.....

For what little it is worth, he says that he kept asking her if she had their tax return completed. He worked out of the state during the week and came home on weekends. He thinks she just gave the "dummy" return to him to sign so that he would not file himself and talk to a tax preparer or claim the children with his higher AGI.

[Black Bart]

hand washing

Yeah, I think I'd give him the axe and slide out of it peacefully if possible; with straight talk if necessary. It's only going to get worse. He apparently did/doesn't trust anybody except the double-crossing dame, views you as just another obstacle to be overcome, disregards your instructions, and lies to you. He includes you "in the loop" only when absolutely necessary; that is, when he gets some hot letters from IRS and wants you to save his self-centered bacon. I'd just tell him I think he's dishonest and am not doing anything else to do with his problems.

Even if you make a few hundred bucks off the situation, he's probably not going to change the way he deals with you (or anybody else) and will worry you to death from now on. Sometimes it's just not worth it.

[taxmandan]

Non-filers

That's pretty much the attitude of non-filers, obviously being delinquent with 3 prior years returns indicates a lack of appriciation for following the rules. They will not do what you say, just make sure your fees are sufficient for you to want to put up with this attitude, it is a constant with these folks.

Daniel

[dmj4]

need info quick re-create expenses

This person talked about in the thread starter got his Examination Report back and of course he left that for me!

His mileage has been decreased substantially. Does anyone have anything handy showing why the IRS should allow him to re-create his mileage.

I am trying to leave for Florida tonight. I am going to call him and give hime the infor and let him call the auditor himself.

Thanks

[DTS]

Mileage

Does he have any repair bills that will show the mileage on certain dates, say February then, maybe October? This might be acceptable to the auditor. They could obtain an average in this time period then apply this average to Jan., Nov. and Dec.

This happened to one of my clients twice. Auditor allowed it.

Dennis

[S T]

Reconstruction

Along with Dennis, the auditor allowed the taxpayer to furnish a reconstruction of his mileage.

Auditor used repair bills prior to the tax year, during the tax, and the next upcoming year, to obtain odometer readings and calculated a total gross mileage for the tax year. Taxpayer was allowed to furnish a monthly calendar listing his business appointments and the approximate miles. We totaled that and arrived at the Total Business Miles and the Auditor accepted it.

If your client has receipts for the motels, etc, then he should be able to furnish a reconstruction of the log to establish the business miles.

Good Luck

Sandy

[dmj4]

He has the motel receipts

This client had the motel receipts with him when he went for the audit. He told the auditor that there was no way he could have driven to all those states on the mileage she was allowing him. So I guess in one way he has already suggested that the receipts be allow to recalculate the mileage. I was hoping that there was something written somewhere indicating to her that she should allow this.

[S T]

Auto Mileage

Well I am sure you are off to Florida by now.

I know of no authority to have IRS allow the deduction. Only contemporaneous records should be available. So it might be in clients best interests to actually produce some records, rather than just the receipts. Most auditors will not calculate it for you or substantiate the deduction on the return. The taxpayer needs to provide the information and try to substantiate the deduction taken.

It has been my experience with auditors that if taxpayer can produce any type of log for business expenses such as mileage, travel, entertainment, they will usually accept, even if they are reconstructed and prepared after the fact.

The current audit that is still pending, the auditor accepted 12 pages, each page had 1 month on it, and on each page was the client or place that he drove to and the approximate miles. We added up off to the side on each monthly paper and provided the auditor with a total and copies of all 12 months. The auditor believed it to be reasonable, and so far as we know the business miles have been accepted. Other issues are pending.

I am sure you already know this, but Here's a link to some info on the record keeping http://www.unclefed.com/Audit-Proofing/step1-5.html.

Sandy

[dmj4]

Haven't left yet.

I haven't left for Florida, yet. I put it off one day to help get something together for this client to disagree with the Examination Report. Response is due by October 21st. He is going to have to handle it himself while I am gone, like he did the audit.

They have him pinned right now for $17,430 over three years of returns.

I have told him that he will be the one going back and documenting the mileage and meals based on the proof that he does have. I am not the one that told my tax preparer that I had a mileage log. I am also not the one that went on the audit unprepared with stacks of past returns for her to look at. I am willing to help him not save him.

Please, see the new thread "Substantiation Requirements" and tell me what you think.