Showing posts with label audits. Show all posts
Showing posts with label audits. Show all posts

Wednesday, November 6, 2013

Fast Track Settlement Program Will Enable IRS to Increase the Number of Audits Each Year

This was in my Inbox today.  When I first read it, I was all excited thinking this is good news.  Great, audit issues can be resolved within 60 days, rather than months or years.  This has to be good news, right?  Wrong.  What this program does is systematize the audit process.  Meaning the IRS will be able to audit a lot more tax returns in a shorter period of time, with a LOT less man-power.  This isn't necessarily good for the taxpayer, but great for increasing IRS's audit ratios.
 
Fast Track Settlement Program Now Available Nationwide; Time-Saving Option Helps Small Businesses Under Audit
 
WASHINGTON — The Internal Revenue Service today announced the nationwide rollout of a streamlined program designed to enable small businesses under audit to more quickly settle their differences with the IRS.

The Fast Track Settlement (FTS) program is designed to help small businesses and self-employed individuals who are under examination by the Small Business/Self Employed (SB/SE) Division of the IRS. Modeled on a similar program long available to large and mid-size businesses (those with more than $10 million in assets), FTS uses alternative dispute resolution techniques to help taxpayers save time and avoid a formal administrative appeal or lengthy litigation. As a result, audit issues can usually be resolved within 60 days, rather than months or years. Plus, taxpayers choosing this option lose none of their rights because they still have the right to appeal even if the FTS process is unsuccessful.

Jointly administered by SB/SE and the IRS Appeals office, FTS is designed to expedite case resolution. Under FTS, taxpayers under examination with issues in dispute work directly with IRS representatives from SB/SE’s Examination Division and Appeals to resolve those issues, with the Appeals representative typically serving as mediator.

The taxpayer or the IRS examination representative may initiate Fast Track for eligible cases, usually before a 30-day letter is issued. The goal is to complete cases within 60 days of acceptance of the application in Appeals.

SB/SE originally launched FTS as a pilot program in September 2006. For more information on taking advantage of the Fast Track Settlement program, please view the short FTS video. Additional background is available on IRS.gov on the Alternative Dispute Resolution webpage and in IRS Announcement 2011-05.

Wednesday, September 11, 2013

IRS to Increase Audits of Prior Year Tax Returns!

The bottom line:  In 2012 the IRS did 1.1 million correspondence audits and applied an additional $9.2 billion in tax liabilities.  People, this will increase.  Read the report that came out this week.
NOTE:  When a majority of taxpayers are striving to do their own taxes, they have very little support when the IRS sends an CP-2000 (paper audit)  And according to the report, these paper audits will increase.

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The Internal Revenue Service needs to strengthen its correspondence audit selection process by auditing more of the prior- and subsequent-year tax returns of noncompliant income tax filers, according to a new government report.
 
The report, by the Treasury Inspector General for Tax Administration, noted that the IRS relies heavily on the correspondence audit process to examine individuals who are suspected of underreporting their tax liabilities.

The correspondence audits often result in significant additional tax assessments, and the IRS has found audits conducted by correspondence to be more economical than other types of audits, such as face-to-face audits in IRS offices or out in the field meeting with taxpayers. Statistics indicate that in fiscal year 2012, the IRS conducted 1.1 million correspondence audits and recommended approximately $9.2 billion in additional taxes.

For its report, TIGTA set out to determine the effectiveness of the filing checks made during the correspondence audit process in the IRS’s Small Business/Self-Employed Division. Filing checks are used, in part, by the SB/SE Division to determine whether the same pattern of noncompliance identified on an audited tax return is present on the prior- and subsequent-year tax returns, and if those tax returns also warrant an audit. When they are properly completed, filing checks enable the IRS to better leverage its auditing resources by increasing the overall compliance coverage of every audit.

TIGTA evaluated a statistical sample of 102 out of 7,470 single-year correspondence audits in which the taxpayers involved agreed that they understated their tax liabilities by at least $4,000. Similar tax issues also existed on the prior- and/or subsequent-year tax returns for 43 of the 102 taxpayers. TIGTA found that 32 of the 43 individuals did not have those tax returns audited and, as a result, may have avoided additional assessments ranging from $2,343 to $18,874.

TIGTA pointed out in its report that one factor that may have contributed to the limited number of prior- and/or subsequent-year tax audits in the sample it examined is the emphasis the IRS places on keeping its audit inventories free of older tax years so there is enough time to complete audits and assess any resulting taxes within the three-year statute of limitations for assessments. There are also some control issues involving how current-year audit results are used to decide whether to audit any prior- and subsequent-year tax returns.

TIGTA recommended that the IRS develop and implement procedures that instruct its auditors how they should use current-year correspondence audit results when deciding whether the prior- or subsequent-year tax returns also warrant an audit. To ensure that the instructions are followed, TIGTA also recommended that the procedures should include instructions for monitoring how well current-year correspondence audit results are used in deciding to audit prior- and/or subsequent-year tax returns.

The IRS agreed with TIGTA’s recommendation and plans to develop an Internal Revenue Manual section to address the case selection and delivery process, in addition to the duties and roles of IRS analysts and examiners.

“We agree that, in certain circumstances, it makes sense to audit the prior- and/or subsequent-year return; however, we need to consider various factors when making that determination,” wrote Ruth Perez of the IRS’s Small Business/Self-Employed Division, in response to the report. “For instance, when deciding whether to select a prior-year return, both the burden on the taxpayer and the administrative responsibilities of the IRS must be considered when there is limited time remaining on the statute of limitations. In addition, to best use our limited resources, we select the next best case for examination which may not be the prior or subsequent year of the taxpayer under examination. We will create procedures for selecting prior-year returns taking these items into consideration.”

The SB/SEC Division has already developed and implemented procedures for addressing all subsequent-return filings on the agreed and default discretionary workloads that are delivered by the IRS’s Campus Reporting Compliance unit, she pointed out.

“We will ensure those procedures are properly documented and monitored,” Perez added. “We agree that there may be some measurable benefit derived from your recommendations. However, we believe the outcome measure, as calculated, does not take into account the impact of our model of working the next best case or our procedures to ensure we only work cases with sufficient time on the statute of limitations for assessment.”

Tuesday, April 16, 2013

The IRS Has a Hit List of Locations Where they Audit the Most?

I was amazed by this article and wanted to share this information with you. 

If You Want to Be Audited, Live in One of These Five Areas

WASHINGTON (AP) - Worried the Internal Revenue Service might target you for an audit? You probably should be if you own a small business in one of the wealthy suburbs of Los Angeles.

You might also be wary if you're a small-business owner in one of dozens of communities near San Francisco, Houston, Atlanta or the District of Columbia.

A new study by the National Taxpayer Advocate used confidential IRS data to show large clusters of potential tax cheats in these five metropolitan areas. The IRS uses the information to target taxpayers for audits. Read more

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