Tuesday, August 30, 2011

Bellevue Tax Lawyer | The 2011 OVDI Update, FBAR Amnesty

In my previous post, I stated that the deadline for the 2011 OVDI is August 31, 2011.  The IRS has extended the deadline for the 2011 OVDI to September 9th.  It also appears that the IRS has relaxed it requirements to file for an extension for the OVDI.  If you are scrambling during the last few days to get your package complete, you now have some breathing room.  

The FAQ now states that if you have not filed an OVDI letter but are interested in entering the program, a tax payer should submit his OVDI letter, by September 9th, including: identifying information and as much account/asset related information as can be obtained.  The taxpayer should then request an extension and amend the OVDI letter for any missing accounts or assets.

If you have any questions please contact me directly or leave a comment.

As with everything related to the IRS, it is difficult to provide comprehensive information related to taxes on the web.  Please do not rely on this article without consulting your tax professional.



Wednesday, August 17, 2011

The IRS Examinations (Audits) Process | Bellevue Tax Lawyer

If you read my previous post on IRS examinations, you know that an audit or examination begins with a letter from the IRS.  This letter tells you that your return has been selected for audit and gives a brief description of what they are requesting.  The examination process is similar whether it is a correspondence, office or field audit.  The IRS will request information related to your return and make judgments on whether the information provided satisfies the requirements of the Internal Revenue Code and IRS publications.  The agent will then either deny or allow the expenses and credits based upon that information.

Unfortunately, the audit process is similar to what most people imagine that is like, especially if it is a field or office audit.  The correspondence audit is an audit but is completed through the mail and phone calls.  The experience most people associate with an audit comes from the field and office audits.  In a field or office audit, the IRS revenue agent sits in the room across from you and requests information and based on the information provided will request more information after the initial meeting.  The Internal Revenue Manual (IRM) limits what an agent can request and ask but these limits are fairly broad.  If you are trying to handle an audit yourself, it is in your best interest to take a look at the IRM.

After the audit is complete, there is some back and forth, with the agent, regarding the determination and the amount owed.  However, if you do not have additional information related the audit, the agent will generally close the examination and issue a determination letter.  The determination letter is also know as the 30-day letter.  If you do not reply within 30 days, the Statutory Notice of Deficiency is issued and you have 90 days to file a tax court petition.  After the determination letter is issued, the appeals process begins.  Appeals is usually where the arguments are made and better results occur.  I will discuss the appeals process in my next post.

As with everything related to the IRS, it is difficult to provide comprehensive information related to taxes on the web.  Please do not rely on this article without consulting your tax professional.

If you have received an examinations (audit) letter from the IRS or have questions about an audit, contact a tax professional.



Monday, August 8, 2011

IRS Examinations and Audit Types | Bellevue Tax Lawyer

To follow up on my previous post about the common types of IRS letters, I am going to write today about the different types of audits.  

I want to preface this post with a word of warning.  If you ignore an examinations (audit) letter, the IRS will assess taxes, interest, and penalties based on the return without those credits or deductions related to the examination.  For example, if the letter relates to your schedule C, the IRS will base the taxable income on the gross income without any expenses.  Another example, if the audit relates to your dependent deductions, the IRS will remove the dependents, possibly the head of household exemption, and any credit related to the dependent/s.  The IRS will then determine the taxes without those deductions and credits--Significantly increasing your tax liability. 

There are three types or IRS audits: a correspondence audit, an office audit, and a field audit.  The correspondence audit is the least serious and the field audit is the most serious. 

Correspondence Audit

The correspondence audit is similar to receiving a matching letter.  Correspondence audits occur when the IRS receives documents that do not match what you have reported on your tax return.  When these occur you will get a letter from the IRS requesting more information or that a proposed additional amount of tax has been added to your return.  These audits are usually resolved by returning the information request.

Office Audit

The office audit is the second level of audit.  The IRS will send a letter requesting you bring certain information to the local office for review.

Field Audit

The field audit is the more serious type of audit.  The IRS will come to you home or place of business and will then request to see receipts and documentation related to your return.  Field audits usually result in the assessment of additional taxes.  However, this does not mean the additional assessment of taxes is correct and you can fight the determination.

As with everything related to the IRS, it is difficult to provide comprehensive information related to taxes on the web.  Please do not rely on this article without consulting your tax professional.

If you have received an examinations (audit) letter from the IRS or have questions about an audit, contact a tax professional.