Sole proprietors that choose to be consultants have to face the fact that their industry is subject to a high probability of being audited by the IRS. This is due to the fact of the mixed personal versus business nature of many expenses of both the consultant and family members. Employee or Independent Contractor One of the main reasons the IRS audits a high percentage of sole proprietors who are consultants have to do with whether they are an employee … Read more →

If a taxpayer first introduces credible evidence into an audit with the IRS, the burden of proof will shift away from them and onto the IRS. This credible evidence must be in respect to factual issues relevant to ascertaining the taxpayer’s tax liability. Audit Credible Evidence Requirement Credible evidence is the quality of evidence which, after critical analysis, the court would find sufficient upon which the base a decision on the issue if no contrary evidence were submitted. This means … Read more →

A correspondence audit is an audit conducted by an IRS Service Center and involves issues that can be resolved either by mail or over the phone. In some cases, the taxpayer may wish to request a conference to discuss issues that they are having trouble communicating in writing or over the phone. Requesting a Conference It is simple to request a conference with the IRS to discuss a correspondence audit; however, it becomes more complicated if details are left out … Read more →

If a formal or informal loan has taken place between a corporation and the owner, a Revenue Agent will be able to see if an appropriate interest rate has been paid under IRC Sec. 7872. Recently, the applicable federal rate for loans has fallow to very low levels. This can be beneficial to taxpayers who can now replace existing higher interest loans with new lower rate loans or convert demand loans to term loans to lock in lower rates. As … Read more →

When the representative of a taxpayer has unreasonably delayed an IRS examination by failing to provide requested information on a taxpayer to the IRS, the agent working the case can request permission to contact the taxpayer directly. If permission is granted to the agent by the IRS, the agent can contact the taxpayer directly and request the information needed. The agent will also inform the taxpayer that the practitioner hired by the taxpayer has delayed the examination unreasonably.

The IRS is not allowed to conduct repetitive IRS examinations against a taxpayer unless substantial audit adjustments are found. The IRS is allowed to audit the taxpayer for the same issue or issues in either of the two preceding tax years but if no substantial change in amount of the liability resulted, the auditor can close the case without adjustment. This basically means, the IRS is allowed to conduct repetitive examinations only in situations where an audit involving either of … Read more →