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It's your worst nightmare....The Tax Audit. It may not be as bad as it seems. Competent representation can make all the difference.
The IRS examines (audits) tax returns to verify that the tax reported is correct. Selecting a return for examination does not always suggest that the taxpayer has either made an error or been dishonest. In fact, some examinations result in a refund to the taxpayer or acceptance of the return without change.
The overwhelming majority of taxpayers files returns and make payments timely and accurately. Taxpayers have a right to expect fair and efficient tax administration from the IRS, including verification that taxes are correctly reported and paid with enforcement actions against those who fail to comply voluntarily.
How Returns Are Selected for Examination
The IRS selects returns using a variety of methods, including:
* Potential participants in abusive tax avoidance transactions Some returns are selected based on information obtained by the IRS through
efforts to identify promoters and participants of abusive tax avoidance transactions. Examples include information received from John Doe summonses issued to credit card companies and businesses and participant lists from promoters ordered by the courts to be turned over to the IRS.
* Computer Scoring Some returns are selected for examination on the basis of computer scoring. Computer programs give each return numeric scores. The Discriminant Function System (DIF) score rates the potential for change, based on past IRS experience with similar returns. The Unreported Income DIF (UIDIF) score rates the return for the potential of unreported income. IRS personnel screen the highest-scoring returns, selecting some for audit and identifying the items on these returns that are most likely to need review.
* Large Corporations The IRS examines many large corporate returns annually.
* Information Matching Some returns are examined because payer reports, such as Forms W-2 from employers or Form 1099 interest statements from banks, do not match the income reported on the tax return.
* Related Examinations Returns may be selected for audit when they involve issues or transactions with other taxpayers, such as business partners or investors, whose returns were selected for examination.
Other Area offices may identify returns for examination in connection with local compliance projects. These projects require higher level management approval and deal with areas such as local compliance initiatives, return preparers or specific market segments.
An examination may be conducted by mail or through an in-person interview and review of the taxpayer's records. The interview may be at an IRS office (office audit) or at the taxpayer's home, place of business, or accountant's office (field audit). Taxpayers may make audio recordings of interviews, provided they give the IRS advance notice. If the time, place, or method that the IRS schedules is not convenient, the taxpayer may request a change, including a change to another IRS office if the taxpayer has moved or business records are there.
The audit notification letter tells which records will be needed. Taxpayers may act on their own behalf or have someone represent or accompany them. If the taxpayer is not present, the representative must have proper written authorization. The auditor will explain the reason for any proposed changes. Most taxpayers agree to the changes and the audits end at that level.
What is an Examination?
There is no statutory or common law definition of the term examination. However, an examination, or audit, may be described as the systematic inspection of the books and records of a taxpayer for the purpose of making a determination of the correct tax liability.
Because government entities are generally exempt from federal income tax, our compliance efforts are generally focused on employment tax and information return reporting.
During examinations, FSLG Specialists search for errors or omissions on employment tax and information returns.
Examples of common adjustments include the following:
* The employer discontinued the reporting of wages for FICA tax purposes before the annual wage limitation was reached.
Compensation taxed for Federal income tax withholding purposes
* but not for FICA and/or Medicare tax withholding.
* Employers did not report the wages of all employees. Examples of common errors of this type include the wages of janitors, part-time or seasonal workers, etc.
* The amount of wages or income tax withheld was incorrectly reported.
* The employer did not report bonuses, vacation pay, or other payments that constitute additional wages for employment tax purposes.
* The employer did not report the fair market value of non-cash compensation.
In addition, the FSLG Specialist will:
* Verify that all appropriate returns were filed timely. If not, filing deadlines and associated penalties will be discussed and assessed, and any delinquent returns will be secured.
*Verify that all deposits were made timely. If they were not, deposit requirements and failure to deposit penalties will be discussed.
Scheduling the Opening Interview
Generally, a telephone call is used to contact the organization to schedule an appointment in the field for an employment tax interview. The FSLG Specialist will contact an authorized individual.
An authorized individual is someone who has authority under the applicable state law to legally bind the entity. Usually state law, the government entity's regulations, or its charter specifies who is "authorized" to engage in certain kinds of activities. The mayor, city manager, school superintendent or comptroller/treasurer (or similar positions in other types of government entities) are other individuals who are most likely authorized by law to bind the organization.
During the telephone call with the authorized government official, the FSLG Specialist will generally:
* Set an appointment for the opening interview that is mutually agreeable,
* Discuss the tax returns and periods under audit,
* Provide information about taxpayer rights and the examination process,
* Discuss power of attorney procedures,
* Discuss the format and availability of books and records,
*Provide general information about issues initially planned to be examined and inform the taxpayer that additional issues may be examined depending upon the information obtained during the examination.
The FSLG Specialist will then send the taxpayer an audit confirmation letter with Publication 1 (Your Rights as a Taxpayer), Notice 609 (Privacy Act Notice), and a Form 4564 (Information Document Request (IDR). Sometimes the initial contact is made by an appointment letter. This general occurs when the FSLG Specialist has difficulty locating a telephone number for an authorized individual.
Information Document Request
The IDR will include requests for documents needed to support issues the FSLG plans to examine. The IDR will list the specific information and documents the taxpayer should provide to the FSLG Specialist. Although FSLG Specialists strive to phrase items in terms that are understandable to the taxpayer, sometimes terminology is unclear. If you have a question about what is requested, you should contact the Specialist for clarification.
Items frequently requested include:
* Books and records such as general ledger, cash disbursements journal, accounts payable ledger, etc.
* Trial balance
* Financial statements
* Forms 940, 941 or 944, 945
* Forms W-2
* Forms 1099
* Employee handbooks
* Employer-provided fringe benefit packages
* Collective bargaining agreement and contracts, if any, with employees
Generally an IDR is sent with audit appointment letter, which will list the specific information and documents the taxpayer should have available at the initial appointment. Another IDR may be issued to the taxpayer following the initial interview to request information and documents needed to support issues that were discus
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Corte Madera Office (Marin County)
21 Tamal Vista Blvd., Ste. 204
Corte Madera, CA 94925
Fax: (510) 280-0798
Fremont Office (Alameda County)
43255 Mission Blvd., Ste. 109
Fremont, CA 94539
Phone: (877) 382-9349
Fax: (510) 280-0798
Toll Free: +1 (877) 382-9349
The eTax Relief Team
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eTax Relief Team.
Christopher R. Jacquez, EA, CEO
Christopher is an Enrolled Agent licensed by the United States Department of Treasury to represent Taxpayer's before the IRS. With nearly fifteen years of experience in tax controversy, preparation and planning, he is recognized as one of the leading experts in his field. Mr. Jacquez, truly has the in-depth experience it takes to succesfully represent his client's before the collection and exam divisions of the IRS and various State Agencies. If you currently have, or are being threatened with back taxes, a wage garnishment, a bank levy or worse, Christopher can provide the friendly and guiding hand that brings your problems to resolution. Christopher takes pride in his firms personal and dedicated approach and values his relationships with his client's and business associates alike.
Over the course of his career, Christopher has successfully built and operated his own tax practice as well as provided valuable support for established CPA firms throughout the city of San Francisco and Silicon Valley. In addition to tax compliance and representation, Christopher appears as a regular guest at public seminars on the tax aspects of real estate transactions and related activities.
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David M. Jacquez, EA, CFO
David has been an EA since 1981 and has been preparing tax returns since long before the computer age. He has succesfully resolved his clients tax issues for over 25 years and has extensive knowledge when it comes to taxes and real estate. David is involved in the management of eTaxrelif.com and is a major asset to the firm. In addition to the tax and management services that David provides for the company, he is also a California Real Estate Broker and handles many real estate transactions for clients in California. If you have a tax lien on your real property David is the gentleman to speak to.
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Carrie is our adminstrative guru. She is an excellent office manager and offers wonderful support to our clients. Carrie is a California Certified Tax Consultant and prepares tax returns for our firms individual client's.
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