Top Tax Write-Offs That Could Get You In Trouble With The IRS – Part 2 of 2

From travel expenses to paying wages to family members, there’s no limit to what people will try to write off at tax time for the sake of their business. But where do you draw the line? Which write-offs you’re trying to write off go too far?

Tax Write-Off: Personal Expenses

This is a category business owners can easily get into trouble with if they’re not careful.

  • Key Issue: You simply can’t deduct services of a purely personal nature that aren’t related to your business.

  • How to Do It Right: Getting an opinion from a tax professional as to whether an expense is deductible for your business makes most sense. The cost of high-speed internet service should be deductible but you can’t deduct such homecare services as gardening, landscaping and tree removal simply because you work out of a home office.

Tax Write-Off: Guard Dog

Believe it or not, this is a legit write-off if taken correctly. In order for a dog to qualify as your company’s guard dog, it helps if you’re a little afraid of the animal yourself (picture a Rottweiler, Pit Bull or German Shepherd).

  • Key Issue: You will only be able to deduct that portion of the dog’s total time devoted to “guard-dog” duty.

  • How to Do It Right: Though it may seem rather obvious, your dog most also be guarding your inventory. Knowing the percentage of time devoted to guard-dog duty, applying this business use percentage you can deduct expenses relating to the dog but you can’t deduct the dog itself. You can however depreciate the dog over its expected lifespan as determined by a local breeder.

Tax Write-Off: Work-Related Uniforms or Costumes

The dos and don’ts of this tax write-off are fairly simple.

  • Key Issue: If the costume or uniform is something you could wear outside your job, you shouldn’t write it off. If, however, it’s obvious you can only wear it for the duties of your specific job, then it qualifies as a write-off.

  • How to Do It Right: A new suit wouldn’t qualify since you can wear it other places outside of your work environment. A perfect example of some rather unusual clothing you can write-off would be a clown suit. Even a Las Vegas showgirl with tight, sequined costumes she purchased for her performances should qualify. In this case a picture is worth a thousand words.

Tax Write-Off: Paying Wages To Family.

When employing a spouse, child or close relative, be careful not to give them any extra-special treatment.

  • Key Issue: Make sure the responsibilities of their job description are commensurate with their age and experience. Pay them the same salary you’d pay anyone else doing the same job.

  • How to Do It Right: Just like any other employee, maintain a personnel file and include them on your worker’s compensation coverage. Report them on the business’ employment tax returns and issue W-2’s at the en of each year.

What Should You Do?

Protect yourself. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego San Francisco and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems to allow you to have a fresh start.

Top Tax Write-Offs That Could Get You In Trouble With The IRS – Part 1 of 2

From travel expenses to paying wages to family members, there’s no limit to what people will try to write off at tax time for the sake of their business. But where do you draw the line? Which write-offs you’re trying to write off go too far?

Tax Write-Off: Travel Expenses

Here’s a write-off that sometimes is difficult deciding just where to draw the line. Can you deduct the cost of going to see a Cirque du Soleil show in Las Vegas if you’re treating your client? The answer is yes, as long as you can justify it as a business expense. And what if your spouse goes along on the trip? As long as they’re a partner or employee of your business and attended conventions or meetings on the trip you took together, then his or her travel and 50% of his or her meals are also deductible.

  • Key Issue: You can deduct travel expenses, and 50% of related meals and entertainment, if the travel is reasonably related to your business.

  • How to Do It Right: The more accurate your records are, the more likely they’ll be accepted and validated by the IRS if you become involved in an audit situation. On your next business trip grab an envelope from the stationary drawer of your hotel room and put all your receipts from that trip in it. Label the envelope with a name and date to help you remember that trip and document it should it be questioned later.

Tax Write-Off: Cell Phone Bill

If you use a cell phone as part of your business, this could be a big deduction for you. So don’t make the mistake of mixing business with pleasure by sneaking too many personal calls onto your cell phone bill.

  • Key Issue: Because of the way a cell phone can be used and many phones and features are bundled into single plans, this expense has come under much scrutiny, so people need to keep good records and keep their actual cell phone bill so they can demonstrate what portion relates to cell phone use and that a majority of the calls were business calls.

  • How to Do It Right: Take a look at your cell phone bill to make sure you receive an itemized report. Because cell phones are considered listed property, you need to keep detailed records of their use. In the case of a land line, it’s a good idea to have a separate phone number for your business since the IRS won’t let you allocate the cost of a single phone in your home to your home office.

Tax Write-Off: Home Office

Home office deductions used to be a big red flag for an audit back in the 1990’s. These days, you just need to use the deduction with caution. A good rule of thumb to follow is that anything that’s unusual and disproportionate to your level of income is something the IRS will check out.

  • Key Issue: Home office space is the exact square footage area in your home dedicated exclusively to the running of your business.

  • How to Do It Right: Get an accurate floor plan of your residence and the exact square footage of the space exclusively used for business. Once you figure out the percentage of your home office compared to your overall home, then you can go back to your heating bills, electric bills and all other bills that go to supporting your home, and figure out the amount you can deduct for running your business.

Tax Write-Off: Home Office Computer

It’s not a good idea to mix your business world with your personal life so you should not use your home office computer for personal tasks if you can help it.

  • Key Issue: If there is the only computer in your house, you will have to calculate the percentage of total time you use it for business purposes.

  • How to Do It Right: Ideally, your best option is to purchase a laptop or tablet and dedicate it to being your personal computer. You then use your desktop computer solely for business. This way you can avoid any messy situations come audit time.

Tax Write-Off: Rent

Wondering if you can still take the home office deduction if you’re a renter? The answer is yes. But you need to know the right way to go about it.

  • Key Issue: Home office space is the exact square footage area in your home dedicated exclusively to the running of your business.

  • How to Do It Right: Get an accurate floor plan of your residence and the exact square footage of the space exclusively used for business. Once you figure out the percentage of your home office compared to your overall home, then you can go back to your heating bills, electric bills and all other bills that go to supporting your home, and figure out the amount you can deduct for running your business.

What Should You Do?

Protect yourself. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego San Francisco and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems to allow you to have a fresh start.

What You Need To Know About The Eggshell Audit

What is an Eggshell Audit?

An eggshell audit is one in which the taxpayer has filed a fraudulent return in a prior year and the auditor is not aware of potential evidence of civil tax fraud or a criminal tax violation. A tax return is fraudulent if an additional tax is owed due to (i) a deliberate intent to evade tax or (ii) there is a willful and material submission of false statements/documents in connection with the return. It is considered an “eggshell” audit because of the care one must take – i.e. walk on eggshells – to guide the examination and prevent suspicion by the auditor.

What are the Risks of an Eggshell Audit?

A typical IRS audit may lead to a tax deficiency assessment whereby the taxpayer owes the underpaid tax plus interest and penalties. A deficiency is assessed when the underpayment was due to a mistake, inadvertence, reliance on incorrect technical advice, honest difference in opinion, negligence or carelessness. Because an eggshell audit includes a fraudulent tax return, an additional risk exists that the audit could lead to civil fraud penalties and the auditor may even refer the case to the IRS Criminal Investigation Division (CID) to pursue criminal tax fraud. If this eventually leads to the filing of criminal charges for tax evasion, your freedom may now be at stake.

What are the Differences Between Civil Tax Fraud and Criminal Tax Fraud?

Technically, the difference is the degree of proof required. Civil fraud cases require the government to prove fraud by clear and convincing evidence. Criminal tax fraud cases require the government to present sufficient evidence to prove guilt beyond a reasonable doubt. Clear and convincing evidence must prove that something is highly probable or reasonably certain, whereas evidence that is beyond a reasonable doubt can leave no doubt that would cause uncertainty in the mind of the person examining the evidence.

Civil fraud results in remedial action taken by the government such as assessing the correct tax and imposing fraud penalties such as fines. These civil fraud fines are generally greater than those associated with a tax deficiency and are owed in addition to the deficiency penalties. Furthermore, interest accrues on the penalty from the due date of the return. If convicted, criminal tax fraud includes the possibility of imprisonment in addition to the unpaid taxes, interest, and penalties. A tax fraud offense may result in both civil and criminal penalties.

What is the Role of a Tax Attorney in an Eggshell Audit?

An auditor is supposed to protect your rights as a taxpayer. However, an auditor is unlikely to inform you if the examination escalates from a civil examination to a criminal investigation. In fact, there can be an ongoing criminal investigation being carried out in conjunction to the audit and the auditor is collecting evidence for the criminal investigation. This is known as a “reverse eggshell audit”. Even if there is no concurrent criminal investigation, an auditor may nonetheless be conducting an examination with the objective of gathering evidence to establish proof of fraud without your knowledge. A tax attorney can intervene at any stage of the audit, ensure that the audit is conducted properly, and limit your future exposure.

Every U.S. citizen has a constitutional right against self-incrimination. An experienced tax lawyer will guide the examination in a way that protects that right while ensuring that any information provided to the auditor is truthful. This ensures that you don’t have to ever speak directly with any representative from the IRS.

A tax lawyer who specializes an IRS audit representation will navigate the taxpayer through the landmines of an eggshell audit. An audit can quickly (and unknowingly to the taxpayer) become a civil or criminal fraud investigation. This risk of additional penalties and imprisonment requires the expertise of a tax lawyer who can help mitigate such consequences. Even if the audit becomes a criminal fraud case, a tax attorney may be able to suppress evidence from the investigation if the taxpayer’s rights were violated.

An experienced tax attorney should provide vital assistance during the important time of preparation leading up to the audit. As a taxpayer facing an eggshell audit, you may have possession of documents that could, if disclosed to the IRS, potentially expose you to significant civil penalties or criminal prosecution. In order to prepare the best defense for you, a tax attorney will work with you to identify this information and make sure it is protected. Again, it is essential to partner with legal counsel on this matter, not your tax preparer, to ensure that the disclosures of sensitive information fall under the umbrella of the attorney-client privilege.

Eggshell audits are potentially dangerous matters for you and your business, as the ability to minimize the scope and context of the IRS’ investigation may mean the difference between a manageable civil penalty and criminal charges or fraud-related penalties.

What should you do?

Through the use of proper strategic planning, the eggshell audit may present an opportunity for the taxpayer to avoid potential criminal liability, and prevent an unpleasant situation from becoming exponentially worse. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego, San Francisco and elsewhere in California has the knowledge and experience regarding eggshell audits to offer our clients the best representation in these matters. We have the tools and techniques to effectively handle eggshell audits, and reduce the chances of criminal action by the IRS.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems to allow you to have a fresh start.

How A Tax Attorney Can Get You Out Of An IRS Audit

If you are faced with an IRS audit you should seriously consider hiring an experienced tax attorney to represent you and pursue an effective strategy to obtain the best possible outcome. There are certain IRS policies and tax procedures that if argued appropriately could result in your audit being terminated before it ever gets started. Some of the things that an experienced tax attorney will consider:

IRS Policy To Avoid Repetitive Examinations

An initial consideration is whether the taxpayer’s audit violates the IRS’s policy against repetitive examinations. The policy against repetitive examinations applies when the taxpayer has been audited in the past two years, and the audits resulted in essentially no change. By showing that the requirements of the repetitive examinations policy are met, the audit can be resolved and closed at this very early stage.

IRS Policy To Avoid Reopening Examinations

The IRS generally does not reopen closed cases but this can occur in rare cases and under very limited circumstances. If the IRS tries to reopen a closed case, an experienced tax attorney would ensure that the IRS is following its own procedures and regulations regarding to reopening closed IRS examinations and seek to show that these own procedures and regulations when applied to your case do not warrant that the IRS audit be reopened.

Statutes of Limitation Applying to IRS Audits

Generally, the IRS can include returns filed within the last three years in an audit. However, there are provisions in the tax code that allow the IRS to expand an audit to include additional tax years if the examination reveals a need to look into the taxpayer’s tax situation in previous years. At the same time, this right of the IRS to examine additional years but be tempered by an opposing requirement that the examination of the taxpayer’s tax return be reasonable. Internal Revenue Code section 7605(b) states that only one inspection shall be made of a taxpayer’s books of account for each taxable year. IRC Sec. 7605(b) also provides that no taxpayer shall be subjected to unnecessary examinations or investigations of his or her tax liability.

Formulating an Audit Strategy

If the three rules above do not apply to your case and an IRS audit is going to take place, it is imperative to promptly devise a strategy for dealing with specifics of the examination and communicating with IRS personnel. An experienced tax attorney will initially evaluate your situation and identify any potential weaknesses or exposure points. With regard to exposure points and weaknesses, your tax lawyer would then develop a strategy for handling those sensitive and vulnerable aspects of your tax situation. From the taxpayer’s perspective, a realistic attitude and outlook must be established, including the consideration of possible settlement of the audit with the IRS at some point down the road. Your tax lawyer should also discuss the possibility of tax litigation and prepare potential issues with an eye toward eventual litigation in Tax Court. Often times the best results can be achieved at the appellate level, but only if the appellate officer believes that you will go to Tax Court if necessary to achieve the best result.

What should you do?

Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego, San Francisco and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.

Description: Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. resolve your IRS tax problems to allow you to have a fresh start.

What An IRS Agent In A Civil Tax Audit Considers Before Referring You For Criminal Investigation

IRS auditors are trained to spot common types of deception and attempts to defraud the Federal government. Any of these acts are called “Badges Of Fraud”. Now the IRS in an audit expects to find a few errors on a tax return and I would agree that a little bit of fudging here or there is not going to send a taxpayer to jail—it might not even raise an eyebrow. But during the course of the audit, errors will be corrected, deductions will be disallowed, unreported income added, and a new tax liability will arise possibly including a few penalties as well as interest.

 

But some taxpayers go too far. Their tax returns read like a fiction novel. Therefore, IRS auditors have been trained to spot hot issues common with of dishonest taxpayers.  Here are the major Badges Of Fraud auditors look for during the course of an examination:

Unreported Income.

When it comes to income, the auditor asks for all of your bank statements from all accounts. The auditor will match bank deposits to income declared on the tax return. If you have bank deposits from unexplained sources, you can be sure that the auditor will question this. The auditor will also look for concealment of bank accounts, brokerage accounts and other property. The auditor will also check for an excess of personal expenditures. For example, if you are spending $100,000 per year and only making $50,000 per year, the auditor will believe you are omitting an entire income stream from your tax return. The auditor will also check out internal information compiled by other departments of the IRS such as the IRS department which organizes data received from foreign banks to detect whether you have unreported foreign bank accounts.

Overstated Deductions.

If you fudge in the area of expenses or deductions, it could be explained as simply making a best estimate rather than totaling receipts. But if there is a substantial overstatement of deductions, it will set off alarms. Some taxpayers attempt to deduct personal expenses as business expenses or claim fictitious deductions. This will only cause an auditor to dig deeper and possibly want to open other tax years for examination.

Self-Employed Taxpayers.

If you are self-employed, the auditor may cut the audit short if you keep a good set of books on a computerized software system or a set of books maintained by an outside bookkeeping service or accounting firm. But if you do not keep books, or the auditor discovers that you are keeping two sets of books, you will subject yourself to more scrutiny.  Other badges of fraud in this area include false entries, backdated or postdated documents and false invoices. And of course if you refuse to make records available or if your books and records don’t match income and expenses reported on the tax return you will send up a red flag. The auditor will also check for improper allocations of income. For example, a distribution of profits to fictitious partners or shareholders, or including your income or deductions in the return of a related taxpayer to optimize your own tax liability.

Questionable Transfers Of Assets.

Auditors also look for the transfer of assets for purposes of concealment or diversion of funds and/or assets by officials or trustees. They can tap into public records and your State’s Department Of Motor Vehicles (DMV) in order to discover assets you may attempt to hide.

Social Media.

Auditors have also been known to look at your activity on social media websites like Facebook and Twitter to gather information on your lifestyle and major transactions like vacations, jewelry and extravagant social celebrations which they will incorporate in a cost-of-living analysis to determine if you under-reported your income.

The penalties for criminal tax fraud are very serious. They range up to 5 years in jail, plus fines of up to $500,000, plus the costs of prosecution for each separate tax crime. Once the criminal tax case is completed CID will refer the case back to the IRS Examination Division where the taxes will be assessed, and the IRS can be expected to add on the civil tax fraud penalty, on top of any criminal tax fraud fines.

Whether and when to answer questions from the IRS, or whether to stand on your 5th Amendment rights, are questions that only a tax fraud lawyer can help you answer. Your financial well being, as well as your personal freedom may depend on the right answers. If you or your accountant even suspects that you might be subject to a criminal or civil tax fraud penalty, the experienced tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Francisco and San Diego and elsewhere in California can determine how to respond to these inquiries and formulate an effective strategy.

Description: Working with a tax attorney lawyer is the best way to assure that your freedom is protected and to minimize any additional amount you may owe to the IRS.

Top Ten Red Flags That Could Trigger An IRS Audit

The IRS randomly selects tax returns for audit each year.

What sets off alarms at the IRS? Well for one thing it pays to keep in mind these 10 “red flags” that could increase the chance you’ll be targeted for an audit.

1. High income. The audit rate for 2011 tax returns, which was about 1.11% overall, shot to 3.93% for taxpayers with income of $200,000 or more. That’s almost one out of every 25 returns. The IRS tends to chase the “big money,” and while that’s no reason to earn less, you should realize that higher income exposes you to a greater audit risk.

2. Unreported income. The IRS computers match up the income listed on W-2 and 1099 forms with the income reported on individual returns. You’re likely to draw IRS scrutiny if you don’t report all of your taxable income or if you underreport the total, even if an omission is inadvertent. Check your tax forms to ensure the information is correct.

3. Large charitable gifts. Besides providing personal satisfaction, deductions for charitable gifts can offset highly taxed income on your return. But the IRS may become suspicious if the amount you deduct is disproportionate to your income. In particular, make sure that deductions for gifts of property are legitimate and include an independent appraisal when required.

4. Home office deductions. If you qualify, you can write off your direct costs of using part of your home as an office, plus a percentage of everyday living expenses such as property taxes, mortgage interest, utilities, phone bills, insurance, etc. But the basic rule is that you must use the office “regularly and exclusively” as your principal place of business. Simply doing work at home when your main office is elsewhere won’t cut it.

5. Rental real estate losses. Generally, “passive activity” rules prevent investors from deducting losses on rental real estate. But a special exception allows a loss deduction of up to $25,000 for “active participants,” subject to a phase-out between $100,000 and $150,000 of adjusted gross income (AGI). Another exception applies to qualified real estate professionals. The IRS may zero in on taxpayers claiming losses under either exception.

6. Travel and entertainment expenses. This is often a key audit target. IRS agents particularly look for self-employed individuals and other business owners who claim unusually large write-offs for travel and entertainment expenses and meals. Note that the tax law includes strict substantiation rules that must be followed in order to deduct any of these expenses.

7. Business use of cars. Another area ripe for abuse by taxpayers is the use of a vehicle for business purposes. The annual amount you can claim via depreciation deductions for the vehicle, based on percentage of business use, is limited by so-called “luxury car” rules. IRS agents have been trained to ferret out taxpayer records that don’t measure up. Another red flag is a claim for 100% business use of a vehicle, especially if another vehicle isn’t available for personal use.

8. Hobby losses. As a general rule, you can deduct expenses for a hobby only up to the amount of the income it produces. You normally can’t claim a loss for the activity, unless your involvement rises to a level of a bona fide business. Usually, an activity is presumed not to be a hobby if you show a profit in any three out of the past five years, but the IRS can refute this presumption.

9. Foreign bank accounts. The IRS has started clamping down on taxpayers with offshore accounts in “tax havens” in which banks do not disclose account information. Failure to report foreign income can trigger steep penalties and interest. If you have foreign bank accounts, make sure you properly report the income when you file your return.

10. Cash businesses. If you operate a small business in which you’re largely paid in cash—for example, if you own a car wash, restaurant or bar, or a hair or nail salon—the IRS is more likely to examine your return. Past history indicates that cash-heavy taxpayers may underreport their income or, in some cases, not report any income at all. Accordingly, the IRS remains on high alert.

These red flags don’t mean you should shy away from claiming the tax breaks you rightly deserve. But when the IRS knocks on your door you need to be prepared.

Description: The Law Offices Of Jeffrey B. Kahn, P.C. has helped many people minimize or avoid adjustments from IRS audits. Working with a tax attorney is the best bet for minimizing adjustments that would create liability to the IRS.

Top Questions On IRS Audits

Many people have approached me with questions on IRS audits and so I have taken the most popular questions and laid them out in this blog with my response.

1. I received an IRS Notice informing you that your return has been selected for examination. What should I do?
The fact that your return has been selected for examination, it does not mean or imply that that you have made an error or done something dishonest. Tax returns are selected for audit in a variety of ways including random sampling. The most important thing is not to panic and instead to reach out to a tax attorney for representation. Provide us with your audit letter and the subject tax returns so we may review your situation.

2. Why should I be concerned if an audit is poorly conducted?
A poorly conducted audit can result in large additional tax adjustments and penalties and interest up to as much as 100% of the adjustment. Most local tax preparers are not equipped to represent you in an audit before the IRS. Because we focus on tax representation, we can make sure that your audit is efficiently and effectively handled and attempt to pursue an audit result with little or no additional tax assessments. We can handle everything from simply submitting missing tax documents to representing you in front of an IRS examiner. Let us do the work for you.

3. How is using a tax attorney beneficial during an audit?
Using a tax attorney to help with an audit can significantly increase your chances of getting a better outcome. Many times individuals don’t realize that audits can go both ways, you may actually end up being owed money after an audit. A tax attorney can analyze your situation and find the best approach to take in order to get the best outcome. The IRS actually prefers working with professional tax representatives because it makes their job easier and helps the process move along more efficiently, which can actually result in a more favorable decision.

4. What does your firm do for an audit representation?
Upon filing a Power Of Attorney Form with the IRS or State Tax Agency, we become the primary contact for the tax agency. You will still receive copies of all correspondence sent out by the tax agencies but you will not be receiving any calls or visits from the agent(s). In connection with the audit we will research any issues that are likely to come up, respond to the agent’s arguments by coming up with answers on your behalf, meet with the agent in person if required on your behalf, negotiate and settle taxes owed if you end up owing more money during the audit and cannot pay, and handle any unforeseen issues that may arise during the audit.

5. Why would I not want my original tax preparer to represent me in my appeal (or in my audit)?
One of the most effective defenses to the imposition of penalties and the associated interest on the penalties available to Tax Counsel, is to argue that the taxpayer relied on a tax professional in the preparation of the return at issue. This creates a potential conflict of interest between you and your original tax preparer where your interest is to protect yourself financially and your original tax preparer’s motivation may be to protect his reputation with the IRS. It therefore becomes highly unlikely that even where appropriate to do so, your original tax preparer will throw himself under the bus by admitting his errors in preparing the returns at issue for your financial benefit to his possible detriment with the IRS including the possibility of preparer penalties and detriment to his professional reputation with the IRS. No such conflict exists where you engage Tax Counsel that did not prepare the returns at issue to prosecute your Appeal.

6. How many years worth of returns are at risk during an audit?
Ordinarily, the IRS has three years from a tax return’s due date or filing date, whichever is later. However, this limitation does not apply when there is an allegation of fraud, when no return was filed, or when the taxpayer is charged with a substantial omission or concealment of items of gross income. Because an audit conducted for one tax year can trigger other tax years and can result in scrutiny of other tax deductions not originally stated in the audit letter, you should take this matter seriously and engage an experienced tax attorney to represent you.

7. What will happen if I do not respond to the taxing authorities audit notice?
Because the taxpayer has the burden of proof to prove claimed deductions, failure to respond to an audit notice usually results in the denial of these deductions leading to the charge of additional taxes along with interest and penalties. If left unchecked, an ignored audit notice and failure to pursue any appeal will result in a final assessment. Once an assessment becomes final, the IRS will start the collection process action that can eventually lead to wage garnishments, liens, levies and seizure of property.

8. What is the worst that can happen if I choose to represent myself in an audit?
Tax agents are aggressive by nature and left unchecked could potentially reach a determination that is unreasonable and inconsistent with the applicable facts and circumstances of your case or their determination may be based on erroneous applications of law. An experienced tax attorney will be able counter a tax agent’s aggressive nature, deal with the complex technical issues that arise during an audit and be an advocate on your behalf as to any factual or legal issues that arise during the examination.

Using a tax attorney to help with an audit can significantly increase your chances of getting a better outcome. Many times individuals don’t realize that audits can go both ways, you may actually end up being owed money after an audit. A tax attorney can analyze your situation and find the best approach to take in order to get the best outcome. The IRS actually prefers working with professional tax representatives because it makes their job easier and helps the process move along more efficiently, which can actually result in a more favorable decision.

Description: The Law Offices Of Jeffrey B. Kahn, P.C. has helped many people minimize or avoid adjustments from IRS audits. Working with a tax attorney is the best bet for minimizing adjustments that would create liability to the IRS.

Received A Notice Of Deficiency To Appeal IRS Proposed Adjustments To The U.S. Tax Court? Let us help you

Before adjustments from an audit can be finally assessed, a taxpayer must be given the right to appeal to the United States Tax Court if the taxpayer should disagree with the findings of the IRS audit. The Appeals Office (or in certain cases the IRS agent) will issue a “90-day Letter” to a taxpayer, which essentially provides the taxpayer with up to 90 days to file a petition with the Tax Court and have his or her case heard by a judge.

At this stage, any professional who is to represent you in Tax Court must be admitted to practice before Tax Court. Requirements for practicing in Tax Court include passing a very difficult income tax exam. Most non-lawyers are not qualified to practice before Tax Court and would, therefore, be unable to provide this kind of tax audit help or represent you. However, a qualified IRS audit attorney can help you.

The United States Tax Court is a Federal court of record established by Congress under Article I of the Constitution of the United States. Congress created the Tax Court to provide a judicial forum in which affected persons could dispute tax deficiencies determined by the IRS prior to payment of the disputed amounts. The jurisdiction of the Tax Court includes the authority to hear tax disputes concerning notices of deficiency, notices of transferee liability, certain types of declaratory judgment, readjustment and adjustment of partnership items, review of the failure to abate interest, administrative costs, worker classification, relief from joint and several liability on a joint return, and review of certain collection actions.
Unlike appeals to other Federal courts, there is no requirement to pay any of the disputed tax liability in order to have your case heard in Tax Court.

The Tax Court is composed of 34 presidentially appointed judge-members. Trial sessions are conducted and other work of the Court is performed by these judges, by senior judges serving on recall, and by special trial judges. All of the judges have expertise in tax law and apply that expertise in a manner to ensure that taxpayers are assessed only what they owe, and no more. Although the Court is physically located in Washington, D.C., the judges travel nationwide to conduct trials in various designated cities.
A case in the Tax Court is commenced by the filing of a petition. The petition must be filed within the allowable time limit. The Court cannot extend the time for filing which is set by statute. A $60 filing fee must be paid when the petition is filed. Once the petition is filed, payment of the underlying tax is ordinarily postponed until the case has been decided.

In certain tax disputes involving $50,000 or less, taxpayers may elect to have their case conducted under the Court’s simplified small tax case procedure. Trials in small tax cases are generally less formal and result in a speedier disposition. However, decisions entered pursuant to small tax case procedures are not appealable.

Cases are calendared for trial as soon as practicable (on a first in/ first out basis) after the case becomes at issue. When a case is calendared, the parties are notified by the Court of the date, time, and place of trial. Trials are conducted before one judge, without a jury. Only those practitioners that are admitted to the Bar of the Tax Court may practice before this court.

Usually a case is settled by mutual agreement without the necessity of a trial. However, if a trial is conducted, in due course a report is ordinarily issued by the presiding judge, setting forth findings of fact and an opinion. The case is then closed in accordance with the judge’s opinion by entry of a decision.

By engaging our tax representation services, you can be assured that your petition and each stage of the litigation process will be persuasive because we know how to present your case with legal argument and tax authority.

Description: The Law Offices Of Jeffrey B. Kahn, P.C. has helped many people minimize or avoid adjustments from IRS by pursuing litigation and negotiations with the U.S. Tax Court. Working with a tax attorney is the best bet for minimizing adjustments that would create liability to the IRS.

Looking To Appeal An Audit Report To The IRS Office Of Appeals? Let us help you

When taxpayers disagree with the findings of their IRS audits, they may usually appeal to the IRS Office Of Appeals. The IRS agent will issue a “30-day Letter” to a taxpayer, which essentially provides the taxpayer with up to 30 days to file a Tax Protest requesting his or her case be heard by an Appeals Officer.

The Office Of Appeals is independent of any other IRS office and provides a venue where disagreements concerning the application of tax law can be resolved on a fair and impartial basis for both the taxpayer and the government. The Appeals Officer will take a fresh look at the case and consider the strengths and weaknesses of the issues in your case. The advantage of appealing your IRS audit to this level provides us with the opportunity to reach a mutually acceptable settlement without expensive and time-consuming court trials.

Using a tax attorney to help with an appeal can significantly increase your chances of getting a better outcome. Many times individuals don’t realize that appeals can go both ways, you may actually end up being owed money after the appeal. A tax attorney can analyze your situation and find the best approach to take in order to get the best outcome. The IRS actually prefers working with professional tax representatives because it makes their job easier and helps the process move along more efficiently, which can actually result in a more favorable decision.

We will communicate directly with the Appeals Officer and build a persuasive case on your behalf because we know how to present your case with legal argument and tax authority. Of course, if we cannot reach agreement with the Appeals Officer, then we have the opportunity to appeal the case to the U.S. Tax Court.

Description: The Law Offices Of Jeffrey B. Kahn, P.C. has helped many people minimize or avoid adjustments from IRS appeals. Working with a tax attorney is the best bet for minimizing adjustments that would create liability to the IRS

Have you been selected for a tax audit? Let us help you

We all dread the thought of an IRS audit or examination. Tax audits can be stressful and complicated as you must be prepared to explain the nature of your income and substantiate the expenses and deductions claimed on your tax return. If the IRS assesses additional taxes and interest, the adjustments are generally matched by the State making an already difficult situation much worse.

Using a tax attorney to help with an audit can significantly increase your chances of getting a better outcome. Many times individuals don’t realize that audits can go both ways, you may actually end up being owed money after an audit. A tax attorney can analyze your situation and find the best approach to take in order to get the best outcome. The IRS actually prefers working with professional tax representatives because it makes their job easier and helps the process move along more efficiently, which can actually result in a more favorable decision.

Upon hiring our firm we will file a Power Of Attorney Form signed by you which authorizes our representation. This will allow the following:

• Audit communications are directed to our firm and we are in direct contact with the IRS or State tax agent assigned to your audit.
• Research any issues that are likely to come up during the audit.
• Respond to the agent’s inquiries and requests for information.
• Meet with the IRS or State tax agent in person as required.
• Negotiate and settle taxes owed if you end up owing more money during the audit and cannot pay.
• Handle any unforeseen issues that may arise during the audit.
• Get your audit underway without the stress of handling it on your own.

We will communicate directly with the agent and build a persuasive case on your behalf because we know how to present your case with legal argument and tax authority. Of course, if we cannot reach agreement with the agent, then we have the opportunity to appeal the case.

Description: The Law Offices Of Jeffrey B. Kahn, P.C. has helped many people minimize or avoid adjustments from IRS audits. Working with a tax attorney is the best bet for minimizing adjustments that would create liability to the IRS.