IRS Audits: Prevent, Cure and Learn
Learn about the different types of tax audits, how to prevent and cure, and how our team of advisers can help you in case you do get audited.
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Learn about the different types of tax audits, how to prevent and cure, and how our team of advisers can help you in case you do get audited.
The IRS has recognized that it would be impossible to catch every taxpayer with outstanding obligations to the IRS. Therefore, when a significant area of noncompliance is determined by the IRS, it uses Voluntary Disclosure Programs (VDP) as a way to entice taxpayers to voluntarily come forward and disclose non-compliance without the fear of criminal prosecution and/or draconian penalties.
The IRS has reduced its training budget by more than 85 percent in an effort to cut agency-wide costs. In 2013, the IRS spent $250 per employee on training; in 2009, they spent $1,450 per employee.
All fifty states have worker classification laws. Most states (like the IRS) will fall back on the common law standards that revolve around behavioral and financial control, in addition to the type of defined relationship at the onset of employment and throughout the employment term.
Audit Technique Guides are particularly useful to tax practitioners because they provide a strong foundation when advising clients of audit risk and they point out common areas for mistakes, provide a brief but inclusive overview about typical business practices within a market segment, and are perpetually being updated and changed.
Some taxpayers with undisclosed offshore accounts are attempting to either enter the Offshore Voluntary Disclosure Program (OVDP), indicating willful failure to disclose accounts, or adhere to the Streamlined Filing Compliance Procedures (SFCP), indicating non-willful failure to disclose accounts, without the aid of an experienced attorney. The reasons below outline why willfulness determination should be entrusted to an attorney.
With yet another cut to the IRS budget one out of every two taxpayers that try to call in for assistance will find themselves unable to connect with an IRS representative. It is likely that in addition to the decreased ability to serve taxpayers there will be more tax schemes aimed at those people who cannot find the assistance they seek.
In the upcoming filing season, the IRS will be managing more compliance items such as the ACA (affordable care act) and FATCA (foreign account tax compliance act) with a reduced budget and staffing.
The Annual Report discusses the ten most litigated tax issues and three case studies of which centers around the impact of audits on small businesses. Here are some facts to consider:
Taxpayers should be very careful with (1) do-it-yourself tax preparation software or (2) using a tax preparer that is unfamiliar with the reporting, measuring, and timing provisions of the affordable care act. Based on this article, it is easy to see that there are critical missteps that can occur if information regarding health care coverage is not properly conveyed to the IRS.
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