IRS Audit Landmines & IRS Matching Audit Letter

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Part 1: IRS AUDIT LANDMINES TO AVOID

Part 2: Did you receive an IRS tax notice showing a difference between what you reported as income and what the IRS shows?

Part 1: Here is a copy of an email I sent to a doctor who was using another CPA firm:

Dear______:

1. The business tax returns were “riddled” with IRS “red audit flag risk dangers”. S Corporation profit was too high compared to your payroll from the dental practice. This is the #1 IRS audit issue for S Corporations.

2. Interest must be paid during the year on loans from the practice to you.

3. Unreimbursed expenses should have been paid through the practice and not taken as an “add on” deduction. IRS matches S Corporation K-1s to the personal tax returns. In this case, there isn’t a match. This serious error could trigger an audit and the interest expenses would be disallowed in an IRS audit.

4. AMX credit card is being used to pay personal expenses and business expenses when there should be two credit for tax and legal purposes.

5. Auto business usable percentage does not make sense at 75.00%.

6. You are definitely missing “easy” tax deductions.

Part 2: Have you ever received an IRS notice? We have been successful in avoiding IRS audit tax assessments because we insist that our client’s get us the actual 1099 forms and by asking for key information.

During the busy tax season, how do we remember to get the 1099 and other key support? We use the David Allen’s GTD and Leo Babauta’s Zen to Done ZTD follow up systems.

Many times it is due to the IRS’s “matching program” which I call “a computer audit”. What do we mean by a “matching program”?

An Example:

1. The IRS receives 1099 forms from our clients’ banks and investment brokerage houses for interest, dividends and capital gains income.

2. The IRS’s computers run “matching” programs that check what our clients’ tax return shows versus what was reported to the IRS. When there is a discrepancy, a tax notice is sent.

3. Our clients receive very few of these tax notices because we have a system that reduces the risk of error!

4. We have fewer IRS audits per 100 tax returns prepared then the IRS reports on their web site. We believe that we have fewer audits because after 30 years, we have come to know what triggers an IRS audit.

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About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

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JBrooks Wealth Advisors, PC.

Certified Public Accountant
Address: 4647 N 32nd Street, Suite B245
Phoenix, Arizona 85018
Phone: 602-292-2009
Email: jeff@jbrookswa.com