Tuesday, November 1, 2011

IRS Screws Up, But Taxpayer Wins

They should make a reality show on the daily drama in a tax office. I volunteer to use my office as I think some of the garbage the IRS comes up with is a joke and I enjoy a good laugh.

Few of my regular clients get audited and for good reason. My team works hard at filing an accurate tax return the first time. We can get aggressive, but only if we have a nail to hang our hat on. No wingers. When audits do occur, they are usually short with a small or no change. The same cannot be said about audits that come from outside the firm.

A regular client received his audit notice recently and we went to work. Preparing a tax return and preparing for an audit are two different animals. Preparing a return requires numbers to be placed in the correct spot with consideration toward tax savings. An audit is the process of verifying those numbers. The audit in question stood the test when reviewed internally. The IRS disagreed.

The auditor, new to the job, disallowed all business miles. The taxpayer's mileage log was in perfect order. The IRS demanded that additional documentation not listed in the tax code for the deduction to be allowed. I told the auditor he was full of... (Sorry, this is a family blog.) After months of discussion and no progress, I filed suit in Tax Court. The auditor called when he received notice of the suit. I told him to get ready to look like an idiot in front of the judge, a real tax professional. The audit was dropped, no change.

All those resources wasted. And to think: Why does Congress want to cut the IRS's budget for 2012? If Revenue used their money more wisely they could cut their budget in half without sacrificing a thing. But then again, I don't run the IRS.