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Discussion Forum Index --> Tax Questions --> IRS Audit of S Corp
PDXCPA (talk|edits) said:
| 10 January 2007
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| I have received an IDR (Information Document Request) for an audit coming up FOR an S Corp. Revenue agent is also asking for personal tax returns of all shareholders in this IDR. Seems rather strange that an agent is asking for returns of shareholders of an S Corp that is being audited. I thought a formal audit or inquiry needs to be established for each entity not a blanket audit of all shareholders involved.
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1099ez.com (talk|edits) said:
| 10 January 2007
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| In my 24 years of practice, I only have 2 cases of PARTNERSHIP audits flowing down to partners. First case, partners agreed to provide tax returns, case open and shut. no change. second case, partners did not agree to provide tax returns. The agent went back to the manager then the manager opened the audits on 2 partners and the entire audit lasted for 2 years. Although the audit ended up with even a little refund on timing differences for 2 partners, but the attorney & accountant fee went thru the roof. So, Ask the partners and be wise.
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PVVCPA (talk|edits) said:
| 10 January 2007
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| Was there a pass-thru loss? The IRS probably wants to see if the shareholders applied the Shareholder Basis rules when claiming the loss on their 1040.
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Deback (talk|edits) said:
| January 10, 2007
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| I don't think it's that uncommon for the IRS to request copies of shareholders' or partners' returns for a company audit. It's best to just furnish the copies they request.
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JR1 (talk|edits) said:
| January 11, 2007
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| Had the same thing last summer with my largest client, happily provided all the 1040's, spent most of the day on S/H Basis...and no change.
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PDXCPA (talk|edits) said:
| 11 January 2007
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| Interesting. She's threatening a long drawn out process if I don't comply with shareholder returns. And yes... loss passed to shareholders close to basis. Thank you very much for your input. It's making me rethink.
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Deback (talk|edits) said:
| January 11, 2007
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| If I was an auditor, I'd want to check out the whole picture. Think like an auditor, and it makes sense.
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Death&Taxes (talk|edits) said:
| 11 January 2007
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| Yet I have this memory of one of our regulars advising not to show the personal returns. I think I know who it was but don't want to be wrong. I tried a category search thru S Corps and it is not there, so maybe I am imagining things. I agree with JR, Deb and 1099ez. Never had an S audit but in two C audits, it certainly made things go easier.
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Deback (talk|edits) said:
| January 11, 2007
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| Well, it only makes sense that, if you withhold documents requested, the IRS would decide to look deeper. I had one C audit in the 90s (at my office), and I had no problem having the requested shareholders' copies available during the audit. (No change)
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Smokeytax (talk|edits) said:
| 11 January 2007
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| I agree about trying to think like the auditor. I've had success by trying to really speed up the audit by being extremely prepared and even giving the auditor workpapers I had developed (re bank deposits, etc). The last time I did this, the auditor wrapped up by 11am, having not even looked at auto records, and was happy to get to lunch early.
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Death&Taxes (talk|edits) said:
| 11 January 2007
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| I always make copies in advance of anything I think the auditor may want to take with them, and I draw up spreadsheets and summaries to their use.
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Mark Eason (talk|edits) said:
| 11 January 2007
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| Following up on JR's comment, I had 2 1120S audits for basis in 2005. It was part of the 50,000 1120S audit for stockholder basis program going on at the IRS.
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Skasselea (talk|edits) said:
| 11 January 2007
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| She can get them anyway so why not make her job slightly easier?
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PDXCPA (talk|edits) said:
| 12 January 2007
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| Well, I agree about being cooperative. I know the shareholders but I do not prepare their individual returns. I spoke with auditor yesterday and told her I'd be happy to provide a list of shareholders and she can contact them directly. Of course, this information is on the k-1s. Thanks for the input.
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