The IRS frequently challenges travel expenses. These expenses have a higher substantiation requirement, which the IRS uses to disallow every expense no matter how reasonable or how certain it is that the expense was incurred. But what if it was exceedingly certain that the expense was incurred and there is a method for computing the…
Category: IRS Audits
IRS Audits
An IRS examination of a taxpayer’s return or financial records to verify their accuracy and compliance with tax laws. Give us a call to see how we can help, (713) 909-4906.
Voluntary Disclosure to IRS of Privileged Communication
The attorney-client privilege projects confidential communications with attorneys. It allows the attorney to avoid disclosing protected communications. But what if the attorney voluntarily discloses information and the disclosure is to the IRS about a tax matter? The court addresses this in Gaetano v. United States, No. 19-1122 (6th Cir. 2019). Facts & Procedural History This…
Can IRS Rely on Third Party Reports to Identify Taxable Income?
If a third party collects monies for you and send you a report reflecting the monies but the reports show too much income, should you be taxed on the higher income or what you actually received? The Ghadiri-Asli v. Commissioner, T.C. Memo. 2019-142, case addresses this. Facts & Procedural History The taxpayer is a physician.…
Did You Update Your Address With the IRS?
Note: the appeals court reversed this case. You can read about the appeals case here. The IRS relies heavily on the U.S. Postal Service to deliver notices to taxpayers. Many of these notices are received by taxpayers. This often comes up when the taxpayer has changed addresses. When the taxpayer does this and the address…
The IRS Isn’t Charged With Knowledge of Other Federal Agencies
The IRS only has to mail a notice of deficiency to a taxpayer’s last known address in order to assess or record a tax liability for the taxpayer. This “last known address” rule is often the subject of disputes. The Sadek v. Commissioner, T.C. Memo. 2018-174, case provides an example where information available to the…
Improbable Position by IRS Sufficient to Impose Tax
The Transupport, Inc. v. Commissioner, No. 17-1265 (1st Cir. 2018) case involved evidence that was not sufficient to support imposing a penalty, but the same evidence was sufficient to hold the taxpayer liable for the tax. The case provides an opportunity to consider how courts evaluate evidence in tax cases. The Facts & Procedural History…
Court Considers Medical Marijuana Company Substantiation
Medical marijuana companies face a number of challenges. The Section 280E limitation on business deductions is one example. There have been a number of court cases that address this limitation. The Feinberg v. Commissioner, T.C. Memo. 2017-211, case addresses a medical marijuana company’s efforts to substantiate cost of goods sold in light of the Section…
Form 2848 Must Specifically List Information Tax Returns
The IRS can generally disclose a taxpayer’s tax information with a representative that is designated by the taxpayer on a Form 2848, Power of Attorney and Designation of Representative. This covers all forms included with the taxpayer’s tax return as long as the type of tax return is listed on the Form 2848. This raises…
U.S. Treasury Says IRS Not Using Information from Foreign Governments
It wasn’t long ago that the IRS was completely in the dark as to what information taxpayers and others were reporting to foreign governments. The IRS would never show up on U.S. audit with information obtained from foreign governments. We do see this on audits occasionally, but it is still a rare occurrence. A recent…
Issue for the New Partnership Audit Procedures Raised in TEFRA Case
The Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) procedures were intended to make it easier for the IRS to audit partnership tax returns. TEFRA failed to deliver. The rules are nuanced and hard to apply. The new partnership audit procedures are intended to remedy this. With the new partnership IRS audit procedures coming…