Discussion:Information to supply to IRS auditor
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RON CARMARK (talk|edits) said: | 15 April 2006 |
An IRS auditor is auditing an "S" Corporation that I prepare. The owners have full and partial interests in several other entities which do not do business with the entity being audited. The IRS auditor is demanding the other returns. My understanding is that if a return has been filed with the IRS that you have no obligation to furnish them. So, I have not provided them. I am correct?
Also, the S Corp. Shareholders picked-up their health insurance as income and then deducted them. The IRS auditor is telling me that it has to be in the corporate minutes to deduct them. This is absolutely crazy isn't it? | |
| 16 April 2006 | |
| If I'm understanding correctly, for the health insurance the shareholder's deducted it on the 1040s as SE health insurance deduction. I have never heard of any requirement that taking this deduction must be in the corporate minutes. | |
Natalieiwasa (talk|edits) said: | 16 April 2006 |
| I don't know whether you are required to turn over the other returns or not. I do know, however, that audits go much more smoothly when the TP cooperates and is pleasant with the auditor. Just think how you would react if you asked your client for some information and instead of giving it to you, he gave you a hard time. Of course, there are auditors out there who can really push your buttons, but I still think it's better to try to cooperate. If the auditor is out of line, you can ask to speak with the supervisor. | |
RON CARMARK (talk|edits) said: | 16 April 2006 |
| I HAVE OTHER SHAREHOLDERS INVOLVED WHO ARE NOT MY CLIENTS WHO I HAVE NO POA FROM.I WOULD NEVER ASK MY CLIENT FOR PERSONAL INFO FOR INSTANCE IF I WAS DOING THEIR BUSINESS.
OTHER BUSINESSES ARE NOT RELATED TO THE ONE BEING AUDITED. ANY IDEAS.TWO TAX ATTORNEYS TOLD ME THAT I SHOULD NOT HAND OVER OTHER RETURNS. THANKS
HAPPY EASTER!
| |
Chautauqua (talk|edits) said: | 16 April 2006 |
| I probably would require the IRS to show me written information that they are formally examining the other entities, giving specifics as to year, EIN, and name of entity. This would include the individual tax returns of the various shareholders of the S corp. It sounds like the IRS wants to go fishing. Without a license. | |
| 18 April 2006 | |
| The job of the licensed representative, whether EA, CPA or attorney, is not necessarily to "cooperate and be pleasant with the auditor". The job is to zealously represent your clients' best interests and to do so within the bounds of Circular 230. If the Revenue Agent/Office Examiner has a legitimate reason to ask for the return, they can get it through internal channels. But, let's be realistic. If your client has a controlling interest in other entities, I would secure a POA for each of them and supply the returns. Not giving the IRS something just because we don't want to do so isn't the best strategy. It's not difficult for the Service to open audits on the other entities and they WILL likely do so, especially if they have reason to believe something is being hidden. In addition, they're certain to audit the owners' 1040 as well. | |
Natalieiwasa (talk|edits) said: | 18 April 2006 |
| The reason I mentioned being cooperative is one of my clients went through an audit (state, not IRS) in which we fully expected he would end up owing money. My client brought in all of the information the auditor asked for (about six boxes as I recall) and was very cordial while talking with the auditor. In the end my client received a refund of several thousand dollars! A little pleansant treatment doesn't hurt, whereas making the auditor's job more difficult can make the entire audit much more unpleasant . . . and costly. | |
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