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more tax advice to understand and avoid an IRS audit
December 22, 2022
more tax advice to understand and avoid an IRS audit 
          Here is some “News You Can Use” for today.
          President Biden’s announcement that the IRS is going to hire 85,000 auditors points to the end of the kinder gentler IRS.  I don’t think that he will be able to get his 85,000 but audit activity will most probably increase so be ready.  When deciding which returns to audit the IRS uses several methods, one of which is the Discriminant Function (DIF) scoring system.  The IRS uses DIF Scoring to review all individual returns, all partnership returns, and all corporate returns without a Schedule L (balance sheet).  It reviews all corporate returns with more than $1 million in assets anyway.  In addition to DIF scoring, returns are sometimes reviewed for compliance checks (i.e. the total wages on the return don’t match the total wages on the 941 (payroll tax) returns, math errors, etc…).   
          There are four types of audits
  Desk audit – a Tax Examiner reviews the return and wants to understand a particular item.  They will check the documentation included with the return to see if it sufficiently explains things.  There are hundreds of thousands of Desk Audits each year.  Most issues are resolved at this level.  If your tax pro does a thorough job of preparing your return and it is subject to a desk audit, you’ll never know and this is a good thing.
  Correspondence Audit – Tax Examiner isn’t satisfied with the results of a Desk Audit and bumps up the case.  This may be referred to a Tax Compliance Officer.  You receive a letter from the IRS asking for additional information.  Do not attempt to answer the letter yourself, you are being audited.  Let your tax pro handle it.  Most importantly, do not ignore it.
  Office Examination – A Tax Compliance Officer has taken over the case, or has referred it to a Revenue Agent.  You are invited to come to your friendly neighborhood IRS District Office and to explain your return.  Do not go without your tax pro.  Don’t ignore it.
  Field Audit – Congratulations, you have hit it big in the “Audit Lottery.”  A Revenue Agent will be coming to your place of business to conduct a very thorough examination.  You will most probably receive an Initial Document Request (IDR) along with the Notice.  Don’t respond yourself ( they may be asking for information that you aren’t obligated to supply – sending it may create new issues), get your tax pro involved, but, be careful, many tax preparers and CPA’s do not have a lot of audit representation experience.  In many cases the quality of their work is being questioned, and for good reason.  In some cases, you may be subject to the audit because your preparer has been identified as “Susceptible” so now is the time to question the low prices that you have been paying or the aggressive deductions and to consider hiring a firm like ours that does have a lot of client representation experience.  Also, check to see who is coming to see you.  Most audits are handled by Revenue Agents.  If the letter is coming from a Revenue Officer, as opposed to a Revenue Agent, there may be more to it.  You may want to involve a tax attorney as well.
          One thing to keep in mind is that the IRS typically sends you a written notice before taking action.  They will never call you on your cell phone and ask you to send them I Tunes cards or meet with them at Starbucks.  The only exception is enforcement, such as a Jeopardy Assessment, or a Collection Visit, from a Revenue Officer.   These only happen after a taxpayer has ignored multiple notices, typically sent by Certified Mail, and the IRS wants to get their attention.  Even under these circumstances, the Revenue Officer rarely padlocks buildings (on the initial visit).  You don’t have to, and shouldn’t, talk to them, alone.  You can refer them to your tax pro, the Revenue Officer will leave.  They won’t be happy about it, but remember, this is what they do for a living and you aren’t going to talk your way out of it, and saying the wrong thing can get you in deeper.  Just be sure to have someone respond on your behalf or risk the Revenue Officer returning, this time with a padlock. 
          The pandemic caused the government to spend a lot of money during the last few years.  They need to enhance their revenues.  There are lot of tax credit and tax deduction scams out there and the IRS has been charged with getting taxpayers into compliance.  Now is not the time to ignore taxes, take flakey deductions, or do your tax return on the cheap. 
 Mitch Reitman
817-698-9999 XT 101
Reitman Consulting Group
Fort Worth, TX 76133
          Mitch, sometimes your advice is as welcome as a Funeral Director come a-calling.  IRS problems, which no one wants or should want, can end up being better or worse than expected.  Using tax preparers, tax advisors and tax experts will hopefully reduce your taxes, reduce your exposure to audit and reduce your chance of penalties and interest.  Using a tax expert if you have any type of audit or issue with your return should be a given.  This is definitely not a time for DIY and probably not a time to give whoever you used to file your returns a second chance to fix it. “Better call Mitch”.
          I’ve stated it many times, and it’s still an unpaid endorsement, Mitch and his team are top notch and if you’re in the alarm industry, and that includes security, fire and low voltage everything, Mitch has unmatched qualifications and experience.  He is very approachable and you should not hesitate calling him and engaging him, not only for your tax problem, but for your everyday accounting and tax filings, so you stay out of trouble in the first place.
          BTW I want to emphasize that IRS never initiates a contact by text, email or telephone.  The first contact will always be by mail.  Don't fall for any scam and don't give out any personal information in response to such solicitation.
          It’s end of year; start fresh next year.

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301