Discussion:New client and audit set for Wed

We requested the audit be moved back but auditor refused. Also have tried calling numerous times to move the place of the audit to my office versus the tp's home. Number auditor gave me and client "is not able to accept incoming calls at this time...please try again later????"

Auditor has an attitude already and haven't even met her.

Since this auditor refuses to give extension of time or even the time of day, can we request a different auditor be assigned to the case? Never done an audit on my own but have the request for documentation and we are missing so much that it is virtually impossible by Wednesday and then without even knowing where the heck she is going to show up to....

Must you have "cause" to request another auditor?

2) put it in writing that records are at your office, so you expect to meet her there. Tell client NOT to be at home. (assumes you have POA).

Cool; since no answer on the phone (yes I have POA), I will send a letter Monday morning via fax to the agent.

No way to request another agent? Unreasonable person she is. I want to amend the return and only wanted time to do so. Bet she then brings in the other years as well. Client paid 40K in past taxes from notices; no question, just paid them and all the returns are incorrect....Sch C nightmares!!

Guess it will be what it will be. Great advice though about client waiting at my office instead of at home.

Maybe killing the auditor with kindness will help....hehehe

You think that is a bad idea?

Since the audit is on the labor and cogs portion of the return per the auditor...

The return is flat wrong....

Income per bank statements under reported by over 100K

Labor was classified as subcontract but she had employee leasing; and for those who were subs, no SSN's, etc.

Client has large expenses for equipment and vehicles that bookkeeper did not deduct on the return so client essentially overpaid taxes.

Good idea to try and amend the return b4 Wednesday so the amended return is available to the auditor? Or SOL on this one? I just know with understating income 35% based on the income figures, we may have a tough road to hoe....

Kevin, how do you handle a request for meeting at TP's home when a home office or expense for business use is involved? I know you want to cleanse the claimed area of toys or any other personal use(unless it is day care). Do you do a tour of the property and then return to your office?

You CAN take 179 on an amended return

This is nonsense. It is the difference between an experienced practitioner and an inexperienced one.

Client should not be present. The audit should be at IRS office or your office. Getting 30 days to prepare would be easy - even if auditor opposed it. I would ask for more.

That was my original question...being unreasonable. With a 300K Sch C business, and with all these bank statements, about 800 checks to enter for the year plus credit cards, leasing employees, etc. To do all the accounting and then the amended return, will take many many hours. Not opposed to working long hours, but with the missing info and have to get it from 3rd parties, it is not enough time.

As well, I believe Kevin is correct in that an EA is more tax oriented whereas CPA's unless we work in taxes are full service and do not specialize in assisting in this nature. Like I said, very thankful for the work...

I am experienced in my field but my first audit on my own. I don't intend to mess this up. The only way to get experience is to handle one, no?

If the number however says "this number is not accepting incoming calls at this time, please try again later...) can't get a supervisor or anyone else to answer.

Will fax the request Monday morning since the fax number should accept incoming faxes and not try again later. Maybe then I will talk to her again and request to speak to a supervisor for the time.

One other technique I have used with 100 success is to tell them to go ahead and issue a 30 day letter so you can deal with a reasonable person in Appeals.

The problem is the examiner is still planning on going to the home of the taxpayer. She has yet to change the place of the examination. All the records are at my office, so the fax at least will be a paper trail indicating that we requested the audit to take place at my office versus her home.

I think because the income is understated so much that meeting with the auditor is the best case or I could be wrong. The return says "self prepared" so hopefully they know that DIY (or bookkeepers) do not file reasonable returns.

Thank you again...such a wealth of information I get here.

I WILL meet with the auditor, not the client I WILL wait for the 911 I WILL request a supervisors name and number if still unreasonable.

Sorry if that was misunderstood. I will certainly take the advice of more "seasoned" persons in the audit realm :)

NOT DOING THE OPPOSITE...if I missed something, please correct me :)

Client I don't know if has been audited before. Yes, the books and records are complete but completely WRONG!!! Client prepared the return thinking the bookkeeper knew what she was doing. The quick books back up is not available, so it has to be recreated from all the source documents.

Guess at this first meeting I can do as fixer said, and give the auditor what I have which of course does not even match the tax return nor is it reported correctly.

Thank you again for the input.  :)

Does your client know that there were major mistakes on her return? Is she willing to amend?

Did she REALLY self-prepare the return, or did a 'friend' with Turbo Tax do it and refuse to sign?

I KNOW there are major mistakes on the return; they are obvious to anyone...yes, she is willing to amend. That was my request to amend the return to a proper one and then have IRS assess the tax (if any additional tax) on the corrected return.

No...her bookkeeper prepared the return with TT and client signed it as self prepared....

An amended return is open to audit also; because you correct the figures does not mean the auditor won't spend some time seeing that you did the job properly, though she might back away faster if she finds the first two or three items are done correctly.

I have gotten much much better at CUF (cash up front) for things like this. Still haven't collected on many, and I am sorry if I vent to you guys.

I have the retainer; not cashed yet, but have it anyways.

I know my amended return will be subject to audit but....

1. It will NOT be a frivilous return 2. I will do the bookkeeping, reconcile the accounts and question anything and everything (anal like that I am) 3. The audit will then be "no change"....I am ultra conservative in my approach; take all deductions but if it is a grey area, I tend to discuss with the client the chances it will be upheld in audit or tax court

Client will not turn in the bookkeeper; ummm this is a "close" friend if you get my drift and they are "partners" as of 2008.

Reminds me of a meeting I had with client and he was talking about his partner. I inquired whether this was an LLC or partnership or S-Corporation, and he said, No, he's my live-in boyfriend. Meeting continued, but with me having a red face for the rest of it.

When I met this client the first time, I kept calling the client "he"; had another "friend" in with the client when we first met. Felt stupid when she said her name.....

If my desk were higher, I would have crawled under it. hehehehehe

As well, when I asked to amend the return to be appropriate, auditor said "That is MY job". I will make the changes. UMMMM B***H comes to mind.

So...can we have some fun and games now?

So it is your opinion - do yourself the favor and keep it to yourself.

It is frustrating as you have seen from past posts/comments from others and myself. This is totally unnecessary to rehash this as has been pointed out and should be beyond the scope of your input as it is counter productive to this post or any other post.

We all know (for those of us who have been here for quite some time) you have earned your place because of the time and effort you have put into this profession. Take the high road and leave it at that - please!

Sorry to again bring this up in this public forum but I would really like this CPA vs EA crap to end. We are professional's here to learn and provide our knowledge to others. That is what most of us come here to provide and I know you are one of them.

ps - Great All-Star game tonight - 15 innings - what a super way for Yankee stadium with all of it's history to show itself. I think that this is/was befitting for Yankee Stadium's final season. I live in SD which is a National League town but this was a show in and of it's self.

Kevin5-I am an EA also and I totally understand where you are coming from. I hate those phone calls when they say "oh, you're not a CPA?" Luckly I am busy enough that I dont even try to explain anymore. Let em go somewhere else. Its an aggrivation when people dont even know what an Enrolled Agent is. BTW, did you see the JKH commercial with the Enrolled Agent? She says she is a Licensed Taxpayer Representative. I thought we couldnt say that we were licensed.

In the past I had purchased the Annotated Internal Revenue Manual which was published by an EA in Florida - Brian Gates, I believe.

Anyone who wants to do much representation work needs to study the IRM.

I have gathered a "sampling" of invoices and of expenses. I also have bank statements and huge red flag with the bookkeeper only reporting income that client received 1099's for. That is why the income is so understated. Expenses and capital expenditures were made which are not reported and the employee leasing company has payroll which was never reported.

Awful attempt at a tax return. Have asked over and over if the preparer would give me some information but it has all been destroyed or lost or etc. etc.

Anyways, I will do my best and I know enough now from all you kind people to assist in the best way I can.

One question....can I request additional time to produce an amended return that indeed can be audited? But this will be a time savings approach for the service if I can then produce financial statements and a tax return that is appropriate?

I have complained for years, but they refuse to get off their butts to do anything.

The American Society of Tax Problem Solvers (ASTPS) uses as one of their primary pitches that you will qualify to become a Certified Tax Resolution Specialist (http://www.astps.org/ctrs.html).

Only one problem with that. It is a violation of Circ 230 for EA's to use the term Certified (unless they are also a CPA, of course).

§ 10.30 Solicitation.

(a) Advertising and solicitation restrictions.

Enrolled agents, in describing their professional designation, may not utilize the term of art "certified" or imply an employer/employee relationship with the Internal Revenue Service.

I have complained many, many times over the years and they keep telling me that I'm wrong. In fact, I have email from the Executive Vice President of the NAEA dated 11/9/06 telling me that I'm wrong, that anyone can use the term certified, yada, yada, yada...

I pretty much agree with Irsfixer. Don't waste your time trying to amend the return. Remember - there is NO provision in the IRC that requires the IRS to accept an amended return. From Koch v Alexander 40 AFTR 2d 77-5545 [start]There is simply no statutory provision authorizing the filing of amended tax returns, and while the IRS has, as a matter of internal administration, recognized and accepted such returns for limited purposes, their treatment has not been elevated beyond a matter of internal agency DISCRETION.[end] The auditor is within their rights to not seek an amended return.

The auditor will make the adjustments based partially on your documentation. Give your evidence. Attach adding machine tapes of expense totals, etc. Your evidence will, in effect, be amending the original return. Based on your post - this will not be settled in a day. You have no requirement to volunteer information but answer TRUTHFULLY.

BTW - Kevin - it's Bryan not Brian Gates. He always introduces himself as Bryan with a "y".  :)

Just don't want to give too much information but the information I am giving is factual.

Thank you ALL for your support and helpfulness!!!

One of the reasons is that you do not want to give the examiner any indications early on that she may need to ask for an increase in her time budget. Let that be a surprise and hopefully, she will get too far in to do that. Another reason, you do not want to hear the following entry read back from the case history file at some point: "Met with POA for TP. POA stated that TP's records were spotty and there are obvious errors. POA aplogized for lack of substantiation." Instead, you want to read: "Met with POA for TP. POA stated that she had not had enough time to obtain records or prepare for exam. POA asked for 60 days. I gave her 30. POA objected but agreed we would revisit the matter toward the end of the 30 days".

No "balls" and none to borrow from. This is something I need to do for myself and not get intimidated. I just want it easy to get minimal documentation and then give me time to pursue getting some documents ready.

So IRS, you are saying perhaps I should not provide the bank statements requested on the 4564, saying I don't have all those records yet? I DO have the bank statements, client has provided them, but I certainly DO NOT have backup for most of the amounts on the statements. I have a sampling of invoices, but only those which match up to the deposits; the rest, I have only a spreadsheet from client and the numbers do not foot to the deposits.

I was planning to provide:

Sampling of invoices that tie to deposits on the bank statements; the missing ones I don't know if owner's capital or what they are.

Total leased employee records that do not foot to the "subcontract" wages on the Schedule C. These were wages paid with w/c, payroll taxes, etc. on the leasing company invoices. But none of the $$ tie to the tax return.

But again, my request to amend the return with the examiner must be documented somewhere, no? She denied my request but then is that not admitting that the records were incorrect?

If I even get 2 weeks I will be happy!! I can't make up numbers, but I can justify the deposits even if understated.

Thank you again and again and again!!

I would not provide a sampling of invoices. Wait until you have them all or are finished with your analysis.

Don't know enough to say about the leased employee records. I would not give them up until you understand the reasons for variances from the return though.

One thing to provide is a one or two page narrative describing the business and basically how it operates. This helps argue against needing the taxpayer there.

Ok what I have:

Bank statements 2003; missing December 2002 and Jan 2004 but all of 2003 present and accounted for...hehe List of invoices issued but due to slow pay (she is a subcontractor and g/c did not pay timely) she has no deposit slips that indicate who paid. I matched up from the spreadsheet payments that tie to deposits and have those invoices. Invoices from payroll leasing company Invoices from vendors for purchases

Expenses for utilities and gasoline??? (listed property use of personal assets for business) I have all the power bills and of course gas receipts but is a vehicle used primarily for business but also personal use. As for utilities.....bookkeeper took 100% of home costs for electric, cable, water, etc.

Took all mortgage interest and property taxes (14K for property taxes? HELLO????) on Schedule C

Problem may arise since all returns 2003 - 2006 were filed the same way with turbo tax. All of them are incorrect. Of course, IRS is only auditing 2003 at the present...filed 10/17/07 and tp paid almost 50K in taxes/penalties/interest without question...just paid the bills that IRS sent without any clue.....

Took accounting fees in 2003 of 5K and cell phone usage, other things are that way high for this type of business.

So, do not give the sample invoices that TIE to the bank statements? That is all I have except for the spreadsheet and the spreadsheet has "cash payments" that never hit the bank account, so if that is audited, we are SOL....

She used the cash payments to pay out of pocket expenses but no record of any of those unfortunately

The taxpayer is obviously going to be assessed negligence penalties.

That preparer needs to be put out of business. Either he/she is incompetent or she is unethical. Either way, it hurts our profession as well as our tax system to allow her to continue.

Anyone else feel strongly about this????? One way or another?

Again, it's all about posturing. That's what IRSFixer is saying. You need to be confident about the work you HAVE done, and truthful WHEN ASKED about the work you have not yet done (without volunteering extra info).

Are you SURE you feel comfortable representing your client? See my remarks to Scottycoyotee in his TFRP thread.

Others who ONLY do representation work have stated (strongly) in the past that a practitioner should step down if he/she can't confidently represent his/her client. All I will say is that your client deserves the best representation they can afford, and you either need to learn how to be good at it or learn to pass it on to someone who is. But you can't 'learn by doing' at your client's expense. You have to learn (by taking CPE) at your expense. Sorry. Just because a person is an attorney, EA or CPA doesn't mean that they should take on every case. Do what you're good at (but be good at something) and don't do what you are not good at.

"Client will not turn in the bookkeeper; ummm this is a "close" friend if you get my drift and they are "partners" as of 2008."

I know what should have been done, but to then convince the examiner, then no....I have only worked alongside a more seasoned professional who had the experience...as a staff accountant in his firm. Now on my own, it is great to know and apply the tax regs to a return, but to represent, it may be that she needs to hire someone more "seasoned".

Do I want to learn? YES....but learning at the expense of a client? NO.

I understand completely and I thank you again and again for the advice. Retainer check is still on my desk. I have yet to deposit it until I know that she is being represented to the highest amount she can be.

And...............IF I KNEW THIS preparer or had her name, you best believe I would raise hell!! I don't think she is unethical but she sure is incompetent. Maybe I should see when I too am not "competent" to handle something I am not used to.

But client comes to me for future work...2007 onward....2 days later she calls, has an audit on the returns filed late in 2007. For any of you who think you can prepare returns and then represent clients that you DID NOT prepare the return originally for, believe me,,,,you have alot of learning to do....I am humbled by your remarks and I take them to heart.....

OK, I'll change my stance to: "Loose lips sink ships."

She now knows however that best to keep that work outside of "family" and have the "friend" get a real job of some sort.

NO signatures will be revealed and no names....payment via form of monies to her so she could have living expenses....

We all live and learn....

Thank you my friends and Kevin? I KNOW you aren't trying to demean me or be mean to me.....

First off, I DID tell the client the "holes" in the return(s) and that even when she first came to me suggested we amend the returns but 2 days later, audit was a surprise to me (and supposedly to her). I then have worked trying to tie back from boxes of information things that may be subject to question.

When examiner first contacted client, it was because cost of labor was so incredibly high in relation to income. That was the original reason for being "tagged".

As far as being self prepared....I know the client's handwriting and the hand written amounts documenting the bookkeeping are not my client's handwriting. Was she aware? I doubt it. She willingly paid the almost 50K in taxes because she was so late in filing returns and paid the tax due on the returns and then notices for penalties and interest. She is also the one who is a Sch C that gets W-2 wages from the leasing company. I think my client is just not knowing how to account for her business entity....

Maybe naive here, but I still think she is getting the "drift"....

One thing I did not see was advice to Sandy on was how to identify if this is or becomes a criminal investigate where her audit planning is no long privileged ... then it needs an attorney. Fortunately, I don't have that kind of experience. The clients that I see who make these kinds of honest mistakes don't have that kind of income flow ...

Off topic ... Irsfixer ... every time I read your handle , I cringe. In my long history, I was a Pricing Manager in Fortune 50 company ... we use to say we did not fix our cars, our dogs or anythings else and certainly not prices!

§7521(C)(a) specifically

you can change your mind right now and not allow the face to face interview, but you had better be prepared, which means knowing the law and knowing the appropriate sections of the IRM relating to your client's audit

As IRSfixer points out, having a written narrative of how the business operates would be a great start.

In cases where there is possible criminal problems, of course hiring an attorney to hire the accountant is essential. I just don't think you are at a point of needing a Covell agreement.

Others have often written that we should get CPE for the threads ... there is more practical information in this thread than CPE materials that I have studied on respresentation!

After that, we got on the same page....and a second date is scheduled.

The only surprise was my own surprise at how I was completely stressed over something that I KNOW how to do....just did not have any one to hold my hand this time.

Thank you to all for the valuable advice you gave which made it less intimidating.

Congratulations, you did well, and YOU did it, not we.

Thank you for the atta boy!!!

BF bought me a bottle of rum to celebrate....waited for me at the office to see how it "went". He had faith in me...I was just not so sure. hehehehehe

Too tired to have a rum and coke though...bubble bath seems more relaxing!!!

As far as the accountant/client privilege, and even the attorney/client privilege, they are filled with land mines, to put it mildly. If you do a lot of work in this area, I highly suggest reviewing these two opinions for just the bare gist of some problems that may be encountered: U.S. v. Lawless, 709 F. 2d 485 (7th Cir. 1983); U.S. v. Frederick 182 F. 3d 496 ( 7th Cir. 1999). If, for instance, attorney hires accountant in a matter, it must be established that the confidential conversations on client's behalf with accountant actually assisted lawyer in providing "legal advice" to client, as opposed to tax preparation or accounting assistance advice. Otherwise, if you think about it, you could hire a lawyer to do your return, or hire a lawyer to hire an accountant to do your return, and be covered by the privilege for the return itself, and this is NOT the case.

On a related point, we would grin at the fact that preparing a return is merely an accounting function (Lawless case). Wouldn't it be easy if it was just about getting the numbers together and plugging them in! We know better, but it does not appear that the courts understand that, or are willing to understand it.

So....I think this may end up to be a good ending (mutual date of paperwork is Sept 30th for auditor to write her report) but she does NOT want to open other years...just wants to see them. Same issues will be involved but she is leaning toward letting me amend those years....

If not, then criminal actions could be taken I suppose. At that time, attorney is definitely involved!!