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SeminoleFSU
Voluntaryist
Simultaneously funny, but not.
The truth hurts sometimes. You have to laugh to keep from crying ;-)
It's rather funny you say that... in 2009, the IRS had a different electric vehicle credit that was structured in such a way that allowed neighborhood electric vehicles (a/k/a golf carts, but don't call them that) to be nearly free. Several manufacturers offered a deal where you paid the same price as the credit. The IRS's original rules stated that the vehicle merely needed to be purchased; I purchased the vehicle on December 23, 2009, and was issued an MSO a day later, however the vehicle wasn't delivered until May, 2010. Subsequently, the IRS learned that many, many people had done this at the end of the year, and changed its interpretation of "purchased" to "put in service". Out of the many thousands of people who ended up taking advantage of that deal, there were several who were rejected. I know of about a hundred people near me who took advantage of it, but I was the only one whose rebate was rejected in my area. I believe the IRS specifically targeted me, either because of my income and/or affiliated party (voting record).
Subsequently, I took it to tax court, the IRS argued it had wide latitude to change the meaning of "purchased" to be "put in service", and the tax court agreed.
SherSlick
Member
(Off topic somewhat)
Because an S corp is basically it's own legal entity. Depending on many factors your "pay" can get taxed twice unlike an LLC that passes through to your personal taxes with a limit on liability. However there are many factors that go into both and I am FAR FROM an expert on this.. (Like if it's a one-man show or multiple people are involved)
Because an S corp is basically it's own legal entity. Depending on many factors your "pay" can get taxed twice unlike an LLC that passes through to your personal taxes with a limit on liability. However there are many factors that go into both and I am FAR FROM an expert on this.. (Like if it's a one-man show or multiple people are involved)
Sorry but an the S part is a tax treatment election, not a corporation type. So there is really no such thing as an S Corp even though all of us, including me, use the term. really they are corporations just like any other corporation, but with a choice to be treated as individuals (i.e. a proprietorship or partnership) for Federal purposes. Most states do not recognise that option, in which case they are taxed as ordinary corporations or some other form at state level.
Thus a tax credit such as we are discussing could be viewed as a corporate credit or an individual non-corporate event, depending on the attitude of the IRS reviewer in question. No surprise that questions can arise and interpretations vary.
Disclaimer: I am neither an attorney nor an accountant, so my statement is that of an interested observer without the requisite legal standing to express an opinion
Thus a tax credit such as we are discussing could be viewed as a corporate credit or an individual non-corporate event, depending on the attitude of the IRS reviewer in question. No surprise that questions can arise and interpretations vary.
Disclaimer: I am neither an attorney nor an accountant, so my statement is that of an interested observer without the requisite legal standing to express an opinion
ahurst
Member
SeminoleFSU
Voluntaryist
Wow. Not surprised at all considering the IRS is basically the criminal extortion wing of the federal government. Gotta collect interest on those Federal Reserve Notes
Woland, did you get your credit? I'm going through an IRS audit for my 2014 return for an EV (Volt - sorry I'm cheap/poor).
1. E-filed Form 8936 with a standard 1040 with standard deduction
2. IRS decided to fill out the outdated form 8834 on my behalf. This form required the AMT - they filled it out for me
3. IRS gave me a credit of about $6000 for the old form 8834. - (20/20 I should have stopped here).
4. I called the IRS and they said they receive 8936 blank. I then refiled a Form 8936.
(there's a chance because 8834 and 8936 were filed that it triggered a double credit error code, causing the audit)
5. IRS then declined my $7500 credit.
6. Got an official Audit Notice asking for further documentation of Manufacturer's certification and they said I owe back the $6000 + interest. The request comes off the Internal Revenue Manual:3.11.6.8.6.10.1 (01-01-2016)
7. I sent them a copy of my Title and a copy of a State rebate application. Waiting to hear back…
The IRS has supposedly accepted a copy of the MSO/MCO as evidence of a "manufacturer's certification". It doesn't exist after a title is issued, so good luck getting a copy after the fact - or after the dealership submits it with the title application.
IMO There is a major problem with the Internal Revenue Manual. "To document the claim" you should "attach the Manufacturer’s Certification." WTH! the "manufacturer's certification" is the application the Manufacturer send the IRS in order to qualify the vehicle under Section 30D Content. NO purchaser has ever received this! The IRS has it. 8936 Instructions mentions the Acknowledgement Letter you can obtain from the manufacturer - a letter that originated from the IRS. That letter according to Section 30D seems to be intended to inform the purchaser that they can rely on the certification. Um - the website for Qualified Vehicles Acquired after 12-31-2009 is the evidence that the IRS already has the "manufacturer's certification." - I guess the IRM isn't written by attorneys; also Section 30D didn't adequately define "manufacturer's certification." 30D uses the terms separately and manufacturer is used possessively and not. I think the major mistake in language is that the term "manufacturer's" was only intended to delineate between manufacturers and not intended to imply the manufacturer possessed the certification documentation in order to give to the purchaser.
If it gets to tax court:
1. Have MSO/MCO, Title, title history, purchase agreement, etc.
2. Argue that requiring an MSO is arbitrary because many purchasers do not have access to it because it is replaced by the Title. The MSO is not the "manufacturer's certification" and the MCO is not mentioned in Section 30D.
3. The IRS is in possession of the "manufacturer's certification" application as it was submitted to them by the manufacturer.
4. Get the Acknowledgement Letter from the manufacturer. - I'm attempting to get it from GM - your luck may be better with Tesla.
Some more speculation:
If they do not accept your documentation, then you are left with challenging the Internal Revenue Manual. Your examinar can't practically challenge the manually. The examiner seems to have some leeway in accepting documentation, though the IRS (according the IRM the IRS isn't legally bound by the examiner's actions only the law Section 30D). The examiner's capacity to be arbitrary in accepting documentation is what you would contest. The IRM has a means for re-evaluating the manual (might be a long process - and i'm not sure how that would happen). Technically I think the examiner could formally challenge the IRM. The court could either decide in your favor based on either your documentation or that the IRS's actions were arbitrary and capricious. Or the court could send it back to audit and have request IRS to re-evaluate the IRM procedures - yikes.
Never purchase a EV without a copy of the MSO/MCO (lesson learned). Get a separate dealer signed Bill of Sale that states the vehicle is qualified for the EV tax credit and is purchased new (and list as much of the 19 elements of Content section of Section 30D as possible).
take my advice with a grain of salt - not a lawyer or CPA, just a honest taxpayer.
1. E-filed Form 8936 with a standard 1040 with standard deduction
2. IRS decided to fill out the outdated form 8834 on my behalf. This form required the AMT - they filled it out for me
3. IRS gave me a credit of about $6000 for the old form 8834. - (20/20 I should have stopped here).
4. I called the IRS and they said they receive 8936 blank. I then refiled a Form 8936.
(there's a chance because 8834 and 8936 were filed that it triggered a double credit error code, causing the audit)
5. IRS then declined my $7500 credit.
6. Got an official Audit Notice asking for further documentation of Manufacturer's certification and they said I owe back the $6000 + interest. The request comes off the Internal Revenue Manual:
3.11.6.8.6.10.1 (01-01-2016)
Form 8936, Qualified Plug-In Electric Drive Motor Vehicle Credit
https://www.irs.gov/irm/part3/irm_03-011-006r-cont02.html
7. I sent them a copy of my Title and a copy of a State rebate application. Waiting to hear back…The IRS has supposedly accepted a copy of the MSO/MCO as evidence of a "manufacturer's certification". It doesn't exist after a title is issued, so good luck getting a copy after the fact - or after the dealership submits it with the title application.
IMO There is a major problem with the Internal Revenue Manual. "To document the claim" you should "attach the Manufacturer’s Certification." WTH! the "manufacturer's certification" is the application the Manufacturer send the IRS in order to qualify the vehicle under Section 30D Content. NO purchaser has ever received this! The IRS has it. 8936 Instructions mentions the Acknowledgement Letter you can obtain from the manufacturer - a letter that originated from the IRS. That letter according to Section 30D seems to be intended to inform the purchaser that they can rely on the certification. Um - the website for Qualified Vehicles Acquired after 12-31-2009 is the evidence that the IRS already has the "manufacturer's certification." - I guess the IRM isn't written by attorneys; also Section 30D didn't adequately define "manufacturer's certification." 30D uses the terms separately and manufacturer is used possessively and not. I think the major mistake in language is that the term "manufacturer's" was only intended to delineate between manufacturers and not intended to imply the manufacturer possessed the certification documentation in order to give to the purchaser.
If it gets to tax court:
1. Have MSO/MCO, Title, title history, purchase agreement, etc.
2. Argue that requiring an MSO is arbitrary because many purchasers do not have access to it because it is replaced by the Title. The MSO is not the "manufacturer's certification" and the MCO is not mentioned in Section 30D.
3. The IRS is in possession of the "manufacturer's certification" application as it was submitted to them by the manufacturer.
4. Get the Acknowledgement Letter from the manufacturer. - I'm attempting to get it from GM - your luck may be better with Tesla.
Some more speculation:
If they do not accept your documentation, then you are left with challenging the Internal Revenue Manual. Your examinar can't practically challenge the manually. The examiner seems to have some leeway in accepting documentation, though the IRS (according the IRM the IRS isn't legally bound by the examiner's actions only the law Section 30D). The examiner's capacity to be arbitrary in accepting documentation is what you would contest. The IRM has a means for re-evaluating the manual (might be a long process - and i'm not sure how that would happen). Technically I think the examiner could formally challenge the IRM. The court could either decide in your favor based on either your documentation or that the IRS's actions were arbitrary and capricious. Or the court could send it back to audit and have request IRS to re-evaluate the IRM procedures - yikes.
Never purchase a EV without a copy of the MSO/MCO (lesson learned). Get a separate dealer signed Bill of Sale that states the vehicle is qualified for the EV tax credit and is purchased new (and list as much of the 19 elements of Content section of Section 30D as possible).
take my advice with a grain of salt - not a lawyer or CPA, just a honest taxpayer.
IRS screwed me on my 2013, giving me only around $4,300 of the $7,500, saying some of my other deductions already offset some of it. I get that, but the point is, had I not bought the Tesla, still would have gotten the $3,200 credit, so that should have nothing to do with my commitment to buy an EV that advertises a $7,500 credit just for the car. What else I do should have nothing to do with it. But that's our lovely government. They'll bend you over any way they possibly can.
Primary reason I decided to lease my 2015. Tesla builds that amount into the lease, so you're guaranteed to get it no matter what. Worked out to about $15,000 less out of pocket to get into the car at driveoff. Payments are $100 more per month, so I give back $3,600 over 3 years. Cars value at 50% guaranteed buyback after three years on a purchase works out to about exactly what you will owe on your loan after three years. So effectively, if you take the buyback amount from Tesla, you are effectively walking away with nothing. No different than the lease. The difference is, I saved $11,400 going in, gave up the $7,500 tax credit and still come out $3,900 over three years. Still get the $2,500 from the state on a lease. Based on the performance models getting killed on depreciation, 50% is probably a good price after three years and wouldn't expect to get more than that on a private party sale. Kelly Blue Book shows a 1 year old P85D has already depreciated 43%. Nada shows 41.3%. Tesla's trade-in offer was 60.5% of the original purchase price, reflecting a 39.5% depreciation after just one year. They have to give you 50% after three years, so only 7 to 10% depreciation over the last two years is not bad. Just get killed in the first year.
Plus with Tesla changing the car as often as I change my underwear, I now don't have to worry about how much the car will be worth after three years. That's Tesla's problem and I saved $3,900 by leasing instead of buying. I did the math. Total cost from the day you walk-in to pick up your car to the day you either turn it in or trade it in is $3,900 less on a lease than a buy. More considering the IRS screwed me out of $3,200. Even more for buyers that don't qualify at all for the $7,500 credit. Leasing guarantees you the credit amount no matter what. So, $3,900 is the least amount you save by leasing. I grows if you aren't able to get the full credit, which unfortunately you won't know for sure until a year later when you file your taxes, at which time it's too late to do anything about it.
Just my 2 cents.
Primary reason I decided to lease my 2015. Tesla builds that amount into the lease, so you're guaranteed to get it no matter what. Worked out to about $15,000 less out of pocket to get into the car at driveoff. Payments are $100 more per month, so I give back $3,600 over 3 years. Cars value at 50% guaranteed buyback after three years on a purchase works out to about exactly what you will owe on your loan after three years. So effectively, if you take the buyback amount from Tesla, you are effectively walking away with nothing. No different than the lease. The difference is, I saved $11,400 going in, gave up the $7,500 tax credit and still come out $3,900 over three years. Still get the $2,500 from the state on a lease. Based on the performance models getting killed on depreciation, 50% is probably a good price after three years and wouldn't expect to get more than that on a private party sale. Kelly Blue Book shows a 1 year old P85D has already depreciated 43%. Nada shows 41.3%. Tesla's trade-in offer was 60.5% of the original purchase price, reflecting a 39.5% depreciation after just one year. They have to give you 50% after three years, so only 7 to 10% depreciation over the last two years is not bad. Just get killed in the first year.
Plus with Tesla changing the car as often as I change my underwear, I now don't have to worry about how much the car will be worth after three years. That's Tesla's problem and I saved $3,900 by leasing instead of buying. I did the math. Total cost from the day you walk-in to pick up your car to the day you either turn it in or trade it in is $3,900 less on a lease than a buy. More considering the IRS screwed me out of $3,200. Even more for buyers that don't qualify at all for the $7,500 credit. Leasing guarantees you the credit amount no matter what. So, $3,900 is the least amount you save by leasing. I grows if you aren't able to get the full credit, which unfortunately you won't know for sure until a year later when you file your taxes, at which time it's too late to do anything about it.
Just my 2 cents.
When I purchased my neighborhood electric vehicle some years back, the company included an IRS letter of determination which was the "manufacturer's certification". I included this in my return.
I had no problems with the Model S, and I don't believe I submitted a certification with it.
What other deductions would have offset the tax credit? Did the other deductions reduce your tax liability below $7500?????
I use my car for work and have significant auto related deductions, apparently they felt some of them doubled up on the tax credit. I don't see how, argued it till I was blue in the face and in the end. what the IRS says, goes. And no, it did not reduce my liability below $7,500. Still had to write a check for a significant amount of money to the IRS.
You got lucky and didn't get audited. Do you save receipts for itemized deductions? You have to provide documentation if you get audited.
Many things can cause an audit at no fault of the tax payer; whether random or the method you submitted your return.
In the 2011 RECOVERY ACT the Treasure basically told the IRS further scrutinize paper and efiled returns. You MAY not get audited for filing these ways, but have higher odds.
Individuals Received Millions of Dollars in Erroneous Plug-in Electric and Alternative Motor Vehicle Credits
https://www.treasury.gov/tigta/auditreports/2011reports/201141011fr.html
There is no official letter of determination given to purchasers of New Qualified Plug-in Electric Drive Motor Vehicles. Dealers and Manufacturers all refer you to the IRS website for the list of qualified vehicles. The IRS examiners considers this insufficient. https://www.irs.gov/Businesses/30D-...ectric-Drive-Motor-Vehicles--Tesla-Motors-Inc
Tesla should have there lawyer's draft a variation of "manufacturer's certification" to give the purchaser. I think manufacturers decline to do this because they don't want to be held accountable.
- - - Updated - - -
This is insufficient documentation for an IRS audit. You need a copy of the MSO/MCO, Title, purchase agreement, and separate Bill of Sale stating it was purchased new and is a electric drive vehicle that qualifies for the tax credit (should also list other 'content' of the "manufacturer's certification). You may need other documentation.
IRS examiners determination of what is acceptable documentation is arbitrary with regard to anything short of providing them with the full certification documentation that the manufacturer submitted to the IRS in order to qualify the vehicle.
I'm, unfortunately, very familiar with the audit process and US Tax Court. I was targeted for audit by the IRS on the tax year including that NEV.
And... that's the reason. Here's what happened - IRS rules were created that permitted a tax credit of up to $6,500 on vehicle types with certain characteristics. Certain manufacturers noted that they could produce the vehicles below the price of the tax credit offered by the government. This started to get advertised - and a lot of people ordered these gol... neighborhood electric vehicles because, after tax credit, they were supposed to be free. I did, too. I ordered it in 2009, was given an MCO and a VIN in 2009, but the vehicle was not delivered until 2010 due to demand. However, in 2010 the IRS changed the rules because they realized what was going on. The IRS's original rules for 30D were that the vehicle had to be "purchased" prior to Dec 31, 2009, which I did; however, in early 2010 it changed its guidance for the 2009 tax year to redefine "purchased" as "put in service", changing the rules. I was targeted because I had a higher AGI (the IRS auditor hinted that they went after higher AGI taxpayers who had filed the forms). My tax lawyer handled my case along with several hundred others, with the same arguments, and the tax court sided with the IRS. I had to pay the tax credit ($6,500+ with penalties and interest), but received $2,700 by amending my 2010 return to use the watered-down credit after the IRS manipulated its guidance.
The IRS gives the letter of determination to Tesla, then enters Tesla in its manufacturers on its web site. As part of the 2009 audit, I was told their web site was sufficient evidence that a vehicle was indeed covered. Tesla could simply publish a copy of that letter for its customers.
Yes, IRS examiners make this stuff up as they go and can vary their approach based on personality and how they feel on a given day. I have a close relative who was one, and another close relative who deals with them on a daily basis. My examiner accepted the copy of the letter I provided to the IRS, but said that the web site determination was sufficient.
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I should know within about 30 days if they accept the most recent documentation I submitted. I sent a dealer verification that was used for my TX state rebate; that might suffice with the title.
I don't have a notice of deficiency yet, 10 months after filing my 1040. They are only auditing the vehicle credit. This was supposed to be simple.
We'll see if they ask again for more docs. About the only things left I could send was the original car invoice, a Certified title history, Certified title and registration verification of a vehicle record, Manufacturer's Acknowledgement Letter, Proof of insurers back to the purchase date, and loan docs (paid off).
May get a CPA EA to submit next round of docs. Although not sure if it's worth paying for them to represent in Small Tax Court; especially with the chance of losing. I don't see any possibility of getting a partial judgement in my case.
At that point, if it whether it goes back to appeals or not, I probably also contact my congressman. Because it's getting stupid at that point. And I need to get the interest to stop accruing - need a CPA to do this correctly.
I don't have a notice of deficiency yet, 10 months after filing my 1040. They are only auditing the vehicle credit. This was supposed to be simple.
We'll see if they ask again for more docs. About the only things left I could send was the original car invoice, a Certified title history, Certified title and registration verification of a vehicle record, Manufacturer's Acknowledgement Letter, Proof of insurers back to the purchase date, and loan docs (paid off).
May get a CPA EA to submit next round of docs. Although not sure if it's worth paying for them to represent in Small Tax Court; especially with the chance of losing. I don't see any possibility of getting a partial judgement in my case.
At that point, if it whether it goes back to appeals or not, I probably also contact my congressman. Because it's getting stupid at that point. And I need to get the interest to stop accruing - need a CPA to do this correctly.
cpa
Active Member
Just adding my two cents' and thirty years' experience:
Generally, IRS examiners are evaluated by cases closed. Period. There is no vested interest in assessing additional tax. If they have to err, of course they will err on the side of the government.
Audits fall into a couple of basic categories: Correspondence audits whereby you are mailed a request to provide documentation and to furnish it to the examiner via US mail/facsimile transmission or scan/email. The individuals requesting this information could be across the continent, and they specifically review these responses. We are hopeful that they have had enough training and know exactly what they are looking for. (But you never know.)
The second category is the computer mismatch tax assessment (nastygram--CP2000)whereby the income and deductions claimed on your return are matched against the information sent to the IRS (think 1099, W-2, 1098, etc.) One way or another this assessment will stick unless the taxpayer can prove that their return is correct as filed; then some or all of the adjustments are reversed.
The third category is the office audit, where you are sent an information request and an appointment time to meet with an examiner to audit selected items on your return. (I am ignoring field audits, but they are just a Supercharged version of an office audit, and usually apply to business returns.)
Disagreements with the findings can be handled usually through an informal meeting with the examiner's group manager. Failing that, you can disagree with the changes. You should receive a "30-day" letter which advises you of your appeal rights. You MUST act within 30 days. Thirty days means thirty days, weekends and holidays included. You MUST follow the instructions punctiliously. You will be assigned an appeals officer to hear your case. These appeals officers are an independent arm (if you believe it--I do) of the Service, and they have great latitude in considering your appeal. They can accept it; they can reject it; they can float a reasonable compromise.
If you miss out on this 30-day period, you have three choices: File a tax court case within 60 or 90 days (I forget which--been a long while.) Pony up the money and put the miasma behind you. Pony up the cash and file a claim for refund on a 1040X, and hope the person auditing your claim is better qualified to evaluate your case on the evidence provided and its merits.
All this said, while it is unfortunate that we have this labyrinthine income tax code and the ancillary administrative rules to carry out proper revenue collection, taxpayers are generally better off to hire a professional just to deal with an examination. It is a sad fact that many examiners do not understand the complexities of the Code. We professionals sometimes have to challenge their application of the law or regulations. Sometimes an adjustment results in a small increase in tax if it is handled correctly, but the examiner handles it wrong with an inappropriately large increase in tax. Taxpayers also are notorious in providing misinformation, too much information or the wrong information. These honest mistakes wind up costing much more time and energy and gnashing of teeth than need be.
When a professional is hired to represent a taxpayer for an examination, the taxpayer(s) sign a form 2848, "Power of Attorney," which authorizes the representative to speak to the IRS and receive all correspondence (except refund checks) that the taxpayer receives. The representative will first meet with the taxpayer and review the audit notice and then ask questions and request just the correct amount of information needed to fulfill the examination. The representative will then meet or correspond with the IRS to comply with the audit request. I advise my clients to stay away from the meeting, as sometimes they wind up shooting themselves in the foot, but ultimately the choice resides with the taxpayer. Finally, sometimes the taxpayer just screwed up, and they do owe additional taxes. A competent review of the salient information will go a long way to determining just what the taxpayer's exposure is--possibly it is less that the IRS proposes, and a quick amended return filed directly with the examiner may just close the case.
Of course I am biased, and I am not trolling here--honest! But I sometimes wonder why people want to handle reasonably complicated income tax issues themselves instead of hiring someone who knows how the system works. Any ethical CPA could assess the situation fairly quickly and give you an estimate for the amount of fees and the likelihood of prevailing. Then it becomes an economic decision for the client whether to pursue the matter or to fold.
My post is more an indictment of the system that anything else. It is nice to think that we can handle our income tax problems ourselves, but the unfortunate truth is that many situations are not as easy as we thought while we were answering the questions on TurboTax.
Good luck in getting your audit issues resolved correctly (and hopefully to your benefit!)
Generally, IRS examiners are evaluated by cases closed. Period. There is no vested interest in assessing additional tax. If they have to err, of course they will err on the side of the government.
Audits fall into a couple of basic categories: Correspondence audits whereby you are mailed a request to provide documentation and to furnish it to the examiner via US mail/facsimile transmission or scan/email. The individuals requesting this information could be across the continent, and they specifically review these responses. We are hopeful that they have had enough training and know exactly what they are looking for. (But you never know.)
The second category is the computer mismatch tax assessment (nastygram--CP2000)whereby the income and deductions claimed on your return are matched against the information sent to the IRS (think 1099, W-2, 1098, etc.) One way or another this assessment will stick unless the taxpayer can prove that their return is correct as filed; then some or all of the adjustments are reversed.
The third category is the office audit, where you are sent an information request and an appointment time to meet with an examiner to audit selected items on your return. (I am ignoring field audits, but they are just a Supercharged version of an office audit, and usually apply to business returns.)
Disagreements with the findings can be handled usually through an informal meeting with the examiner's group manager. Failing that, you can disagree with the changes. You should receive a "30-day" letter which advises you of your appeal rights. You MUST act within 30 days. Thirty days means thirty days, weekends and holidays included. You MUST follow the instructions punctiliously. You will be assigned an appeals officer to hear your case. These appeals officers are an independent arm (if you believe it--I do) of the Service, and they have great latitude in considering your appeal. They can accept it; they can reject it; they can float a reasonable compromise.
If you miss out on this 30-day period, you have three choices: File a tax court case within 60 or 90 days (I forget which--been a long while.) Pony up the money and put the miasma behind you. Pony up the cash and file a claim for refund on a 1040X, and hope the person auditing your claim is better qualified to evaluate your case on the evidence provided and its merits.
All this said, while it is unfortunate that we have this labyrinthine income tax code and the ancillary administrative rules to carry out proper revenue collection, taxpayers are generally better off to hire a professional just to deal with an examination. It is a sad fact that many examiners do not understand the complexities of the Code. We professionals sometimes have to challenge their application of the law or regulations. Sometimes an adjustment results in a small increase in tax if it is handled correctly, but the examiner handles it wrong with an inappropriately large increase in tax. Taxpayers also are notorious in providing misinformation, too much information or the wrong information. These honest mistakes wind up costing much more time and energy and gnashing of teeth than need be.
When a professional is hired to represent a taxpayer for an examination, the taxpayer(s) sign a form 2848, "Power of Attorney," which authorizes the representative to speak to the IRS and receive all correspondence (except refund checks) that the taxpayer receives. The representative will first meet with the taxpayer and review the audit notice and then ask questions and request just the correct amount of information needed to fulfill the examination. The representative will then meet or correspond with the IRS to comply with the audit request. I advise my clients to stay away from the meeting, as sometimes they wind up shooting themselves in the foot, but ultimately the choice resides with the taxpayer. Finally, sometimes the taxpayer just screwed up, and they do owe additional taxes. A competent review of the salient information will go a long way to determining just what the taxpayer's exposure is--possibly it is less that the IRS proposes, and a quick amended return filed directly with the examiner may just close the case.
Of course I am biased, and I am not trolling here--honest! But I sometimes wonder why people want to handle reasonably complicated income tax issues themselves instead of hiring someone who knows how the system works. Any ethical CPA could assess the situation fairly quickly and give you an estimate for the amount of fees and the likelihood of prevailing. Then it becomes an economic decision for the client whether to pursue the matter or to fold.
My post is more an indictment of the system that anything else. It is nice to think that we can handle our income tax problems ourselves, but the unfortunate truth is that many situations are not as easy as we thought while we were answering the questions on TurboTax.
Good luck in getting your audit issues resolved correctly (and hopefully to your benefit!)
