Recent IRS audits during 2019
The first was a UBER driver who prepared his own 2017 returns, who was audited for the business, responded to the audit, was completely disallowed, then
looked for help. He had good records but everything needed to be re organized so the IRS knew what was deductible and what mileage should be left out.
He was a very busy driver but was able to help me compile the applicable business miles and the package was sent off. The IRS allowed everything we sent
them and the client complained about not requesting IRS to allow the personal trips to Bulgaria. One way to have successful audits is to not waste auditor's
time with frivolous exercises, otherwise, it was completely successful.
A new client brought her audit from an out of state internet sales business. She had sent materials back to the IRS and they returned it without going
through the data. She needed some organization and explanations of her bounced response. All the audits now are by mail and correspondence, but they have
the same goals which require taxpayer attention to detail with organization to relate exactly to the lines on the returns, with original documents for
verification. We spent some time on it back and forth, The client paid attention to me and we finally sent it in. We received a no-change response of
complete acceptance and no money owed.
A third audit was from a return we filed for a retired lady who was in the cosmetics business. Well, almost in business because the IRS limits hobby losses
when the ladies talk about the demo, and then discuss whatever old friends talk about over a glass of wine. The client had used an internet sales credit
card account as a cash account to somehow run other credit cards against it to take cash out. Problem was that the other card charges were all picked up by
the vendor and IRS as taxable sales. This one took some time to unwind and organize but thanks to the client's diligence we packaged it up and a month later
succeeded in another no-change, nothing-owed conclusion.
A fourth audit last year which was by the state of Montana. A California fiduciary sold a huge million dollar estate property there but it
was, by miscommunication and lack of documentation, reported in the wrong state. The Montana tax agency lacked tracking ability to reference cases by name
and Federal ID numbers and had been forwarding inquiries to the client by case number. Missing data was the essence of the original problem and ended up back
at the same client level whereas we corresponded directly to Montana by Fiduciary name and ID number while Montana was dead ending sending case material to
the client. Finally, it got untangled with no change or taxes from the sale [an estate residence].
It is clear that the correspondence auditors are under pressure to review materials quickly and love to receive them in good order. I believe the main reason
we have such good results is by taking the extra time to organize and present. Years as a corporate division controller have paid off with the current audit
environment. I remember many times when the financials needed to be sent off for consolidation by the conglomerate HQ and we had three days to close and mail.
Even if it was on a week-end. And then the auditors would show up after year-end.
Outside of audits, we are now receiving the results of people filing erroneous tax returns that they self prepared several years ago. They are now auditing
by correspondence letters these returns for the tax year 2017 and at year-end we received two in one week. We are now amending these returns and I believe
the IRS just turned the audit hose on. Since these are old returns I believe they saved them up and are now playing catch-up with the lot. We are prepared.
* Phillip B Chute is an Enrolled Agent, tested, licensed and appointed by the IRS directly. He has prepared or supervised over 25,000 tax returns over