Discussion Archives:Audit of personal tax retutn

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Discussion Forum Index --> Advanced Tax Questions --> Audit of personal tax retutn


Discussion Forum Index --> Tax Questions --> Audit of personal tax retutn

Taxoncall (talk|edits) said:

31 January 2011
Please assist.

This audit started out with the 1040 with schedule C. In analysing the bank statement Revenue Agent noticed that a coroporation existed for the taxpayer. The taxpayer is a 50% shareholder with another person owning 50%. The corporation is a regular C-Corp. I prepared the corporation return. The other shareholder is not under audit neither is the C-Corp. The RA want to pick up the corp return in the audit stating that it is a related return. My client has signature authority on the C-Corp check. There is another C-Corp in whch he is a not a shareholder but can sign checks. She want him to provide evidence that he is not a shareholder and I told her that the burden is on the IRS to show that he is a shareholder. I am telling her that I am not going to provide ger with any info on either C-Corp since it is not an S-Corp. Moreover I cannot discuss it with her because there is a conflict. She even went further and ask for the other shareholder information, SSn Name and address. I told her that she is out of line. Can she look at the C-Corp return as a related return to the 1040 Sch C? Should I tell her manager that she continue to question about giving her the 1120 even after I told her that there is a conflict? Can she refuse to take the 1099MISc if the address and SSN of the receipient is unknown?

Death&Taxes (talk|edits) said:

31 January 2011
I was following you until I ran into this: "Can she refuse to take the 1099MISc if the address and SSN of the receipient is unknown?" What does this have to do with the Schedule C audit?

Szptax (talk|edits) said:

31 January 2011
Do you mean - if the 1099Misc does not have the detail for the recipient (address & ssn), can the Agent refuse to allow the expense?

Death&Taxes (talk|edits) said:

31 January 2011
My question, Szp, is that I was reading about this expansion of an audit, when suddenly this 1099 popped up. It's like answering "Chocolate or Vanilla" with 'yes.'

I also wonder if the C Corp paid the individual via 1099 (not the one he wonders about).

There is a definite issue of proper representation here. POAs would be needed before talking about the corporation, or the other corporation, but in the long run without securing POAs she will probably send audit letters to the corps.

Szptax (talk|edits) said:

31 January 2011
I do enjoy a B&W shake!

I was thinking it was 1099s issued from the schedule C. But I see your point the 1099 could be from the C corp top the taxpayer. I wonder if that is the only sch C income? Not enough info.

Tax Writer (talk|edits) said:

1 February 2011
Well, asking for C Corp return when you don't have a signed Form 2848 for the entity is not only improper, it's against the law. You CANNOT disclose without proper authority. And no, I would not hand over the C Corp return without a summons, if only to save my own butt from violating disclosure rules.

Taxoncall (talk|edits) said:

1 February 2011
Sorry my friends but the office got busy.

Sorry that I threw in the 1099 without explaining. These are 1099MISC for contractor. They were exchange students who are gone back to there country and he do not have addresses or TIN for them. She refuse to take the 1099 but I will be faxing them to her. There are check to support the payments.

The officer of the Corp who was an employee received a W2.

She thinks that I have an obligation to discuss the C-Corp with her and if not I am hiding something.

Taxoncall (talk|edits) said:

1 February 2011
Does she has any basis for requesting the C-corp while conducting audit of 1040.

Szptax (talk|edits) said:

1 February 2011
No obligation to discuss the C corp with her, except to say "Sorry". Whether or not it is relevant to the individual return, is not relevant to the request! She should know that's a violation and I would smile & sweetly say - "Mam' you know that's an ethical and legal violation".

Szptax (talk|edits) said:

1 February 2011
For starters: Practitioner Penalties

section 6713 - Wrongful Disclosure of Information furnished for or in connection with the preparation of a return - 250 per disclosure (max 10,000)


section 7216 - Unauthorized Disclosure or use of Taxpayer Information (applies only if preparer knowingly or recklessly discloses or uses the information - maximum 1,000 fine and or 1 year imprisonment (Of course this is geared to a preparer using the info for personal gain, but to disclose without authority is reckless!)


Also look at the EA guidelines & NATP.

It matters not that the IRS is requesting the information. They are not auditing the C corp, at least not yet. And you do not have the POA.

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