Screwing with the IRS
Last week's episode of Nip/Tuck had an encounter between one of the plastic surgeons and an IRS auditor unlike any I have have ever seen or heard of. It’s wacky enough to amuse taxpayers, tax pros, and IRS employees.
Record keeping requirements - Good summary of rules from the California FTB that apply for IRS purposes as well. Calif. taxpayers need to be sure to catch the fact that the statute of limitations (SOL) for FTB to come after you is four years after filing a tax return, one year longer than IRS has. FTB is sneaky in exploiting that extra year. I have seen plenty of cases where people had tossed their records after the IRS’s three years SOL had expired, only to be unable to defend themselves against FTB assessments. With the current budgetary disasters in Sacramento, we can expect FTB to pull out all of the stops in regard to squeezing every last dime out of people, whether they really owe the money or not.
Businessman charged in plot to kill IRS agent - An insanely extreme way to deal with an audit.
IRS Audits of Millionaires on the Rise – Nothing really new here. IRS has always put more audit focus on the higher income tax returns. This is just another example of how using a C corp to smooth out income and keep the 1040 income from being too high can reduce the audit potential.
Appropriate attire for an IRS audit?
A Visit To The IRS
A man, called to testify at the IRS, asked his accountant for advice on what to wear. "Wear your shabbiest clothing. Let him think you are a pauper."
Then he asked his lawyer the same question, but got the opposite advice. "Do not let them intimidate you. Wear your most elegant suit and tie."
Confused, the man went to his rabbi, told him of the conflicting advice, and requested some resolution of the dilemma.
"Let me tell you a story," replied the rabbi. "A woman, about to be married, asked her mother what to wear on her wedding night. 'Wear a heavy, long, flannel nightgown that goes right up to your neck.'
But when she asked her best friend, she got conflicting advice. 'Wear your most sexy negligee, with a V neck right down to your navel. The man protested: "What does all this have to do with my problem with the IRS?"
"No matter what you wear, you are going to get screwed."
IRS Research Program
Heads up for another one of IRS’s random selections of individual tax returns for an in-depth examination in order to update their top secret DIF scoring program to select the tax returns with the highest likelihood of cheating.
According to this announcement from IRS, this go-around should be less burdensome than their previous such studies, with much fewer returns being selected than had been used in the past; 13,000 lucky taxpayers instead of the more common 45,000.
I understand how this may be a necessary evil of the tax system; but one aspect of it still reeks of unfairness. Those folks lucky enough to be among the 13,000 randomly selected to assist IRS in this study will still have to personally bear the full cost of going through the audit process, which can easily run into several thousands of dollars in professional fees, to say nothing of any additional taxes that may be assessed as a result.
I realize that it’s crazy to expect IRS to consider fairness in the equation; but it would dramatically increase any goodwill they ever expect to have if they would reimburse taxpayers for the costs incurred while assisting in an IRS research project. It just seems proper that the party benefiting from the study should bear the expenses of conducting it.
From a Reader:
Subject: For the Entrepreneur: How to Avoid Being AuditedHi Kerry -I just would like to pass along this link. It's an article I recently published over at Ask the Advisor titled "How to Avoid Being Audited if You're Self-Employed". I thought you and your readers over at Tax Guru-Ker$tetter Letter might be interested in having a look. Let me know what you think if you have a moment.Thanks,Jimmy AtkinsonAsk the Advisor
While not covering all of the ways in which to lower one's profile on the IRS audit radar, you have addressed some good points.
I will post a link to this on my blog.
Thanks for sharing it.
Hey Kerry. Thanks!