How to Improve IRS Audit Process: Example Problem

Related BrainMass Solutions

• Audit Practices

  This is a great opportunity to show the IRS that you made a mistake and want to correct the mistake on your own (The information was obtained at http://money.usnews.com/money/personal-finance/articles/2012/01/25/how-to-avoid-an-irs-audit 'How to Avoid

• Thoughts on how uncertainty could affect taxpayers

  to maintain a level of uncertainty regarding audit selection criteria, and how uncertainty works to the benefit of the IRS.

• Waiver for the expiration of the statute of limitations

  By refusing to sign a waiver, the audit process is jumped ahead to the more formal procedures of filing in Tax Court. After the tax court filing, the audit will be remanded back to the regional appeals office.

• Tax research: Non-liquidating distributions

  Advise the client on how to avoid the mistake(s) and how you would respond to the IRS inquiry if an audit request is received. Take a position as to whether the current tax rules related to the payment of dividends are fair.

• Corporate Deductions and Corporate Transactions

  The IRS looks at reality - if the business took in $100,000 in gross receipts and had deductions in the amount of X dollars, how was the business able to survive? This is called a reality check or a reality audit.

• Federal Taxation: Assessing Audit Risk, Tax Evasion

  If Jayden's expenses are extraordinarily high, the IRS may question how Jayden is supporting himself.

• Divorce law, tax audits and commercial property

  She explains: "Between caring for my father and my job, I barely have any time left to do anything else! This entire process is overwhelming. The last thing I need is to deal with an audit.

• Taxation: would a fifth year business loss ensure an audit?

  In this regard, a return selected for audit would be judged for only the year of audit. The selection process would not know about the other four years.

• Who would the IRS audit - the flow-through entity or the tax

  It wouldn't do the IRS a lot of good to audit the taxpayer in that case, they would have to audit the entity to determine if the financial data has, in fact, been misstated.