Discussion:IRS audit of Schedule C Expenses

How do I approach this with IRS agent??..He is going to see $45k receipts and no COGS and other expenses (looks like made up numbers by the accountant) incld car expense based on 30k miles for the year...It appears that this accountant is getting audited for his other clients as well...My client is very concerned as he gave all the bank statements to this accountant every year and he did the tax return from those numbers and now those numbers are not reported correctly...He did not (intentionally) try to hide anything but the accountant did not do his job to report the numbers correctly...This is a SP with Schedule C income...One more thing, the TP has used this one bank account for everything, business and personal expenses...I can not believe he did that but he did..what is the best course of action..

And the taxpayer didn't notice the unreasonably low sales amount on the tax return he signed?

"It appears that this accountant is getting audited for his other clients as well."

Any you know this, how? If true, your client might be best represented by an attorney, especially if the audit is part of a sytematic investigation of the preparer.

"TP has used this one bank account for everything, business and personal expenses."

This is a poster child for worst practices.

-- Larry Hess, CPA ~ Albuquerque, NM

BTW, Bal, where did you learn to use ellipses instead periods?

I thought we as EA/CPA can do what an attorney can do..representation is what I am trying to do and this looks like a perfect client?? why an attorney??

He better make sure he has receipts to cover all the costs of goods sold. As long as you can prove the difference between $240k of sales and the reported amount of $50, it won't affect taxable income. I'd worry about the other stuff.