Small Business Advice and Tips - home business, starting a small business, small business ezine, small business newsletter, business tips, self-employed, tax tips, sales and marketing, business loans

Strategies for Small Business Success - Gold Mine Tactics
Strategies for Small Business Success - Gold Mine Tactics
Strategies for Small Business Success - Gold Mine Tactics
E-zine For Small Business Owners

"Insider Secrets Revealed
"

FREE Monthly Tips for Increasing Profit, Improving Cash Flow, Cutting Taxes & Building Wealth (a $250 Value!)

Your Name

Your Email



Small Business Advice and Tips - Gold Mine Tactics

Quote:

"Many receive advice, only the wise profit by it"

- Publilius Syrus

 

>

> Recommend Us


Strategies for Small Business Success - Gold Mine Tactics

Strategies for Small Business Success - Gold Mine Tactics
Print this article

 For Small Business Owners & the Self-Employed
Small Business Advice and Tips - Gold Mine Tactics

Insider Secret:

3 Ways To "Cripple" an IRS Audit

If you think you can adequately represent yourself before the IRS, please consider this true story

by Alex Goumakos, CPA


Note: The following is adapted from Chapter 17 of Gold Mine Tactics: The Business Owner's Success Manual.

About two years ago a friend of mine we’ll call “Jeff” -- not his real name -- had his personal tax return audited by the IRS. I was not his CPA at the time. For some unknown reason (actually, I feel it was the accountant’s fee), Jeff decided -- foolishly -- to handle the situation himself. He figured he would just be honest and use a no-nonsense, direct approach…

Then came the initial meeting with the Internal Revenue Officer.

Jeff’s worst nightmare manifested itself in the form of a handicapped Revenue Officer. Yes, you read that right. The Revenue Officer assigned to Jeff’s case was wheelchair bound. Try telling your hard luck story -- which Jeff tried to do -- to a paraplegic Revenue Officer.

Not even Mother Theresa would have stood a chance.

The Revenue Officer refuted nearly every piece of corroborating evidence (Jeff, by the way, didn’t keep the greatest accounting records). To make matters worse, Jeff walked into the audit meetings with information that was never requested.

[Jeff was trying to build a case based on economic hardship – which was true – and he tried to show the agent that other family members had loaned him money to pay for business expenses – partially true. He had no loan documents, of course, and the agent refused to accept signed letters from the other members of his family. Result: the loan money was considered income.]

To make a long story short, Jeff was initially assessed additional tax, interest and penalties to the tune of almost $12,000. He was, as you can imagine, distraught. That’s when I stepped in.

After calling the agent and reviewing the case, it was discovered that he was arbitrarily disallowing a section 179 depreciation deduction and reclassifying it as regular depreciation. This caused Jeff to lose out on expenses he was entitled to take. When I asked the agent to provide me with authoritative guidance as to why the deduction was changed, he said, “It was a mistake.” I also got the agent to drop the loan proceeds as income.

After everything was said and done, the assessment was changed and Jeff ended up with a total revised tax bill of about $5,800 (yes, he wasn’t a saint either). The morals of this story are this:

  1. NEVER attempt to go through the audit process without qualified and experienced representation. Hire a tax attorney, CPA or Enrolled Agent. Yes, it will cost you money in professional fees, but think real hard of what it may cost you in the final analysis.

  2. Don’t take ANYTHING the IRS tells you at face value. I don’t care who you talk to, IRS agents are human beings and have the same emotions as you and I (envy, jealousy, anger and dare I say it? Deceit!) Get everything in writing and ask them what Code sections, Revenue Rulings, etc, they relied upon.

  3. Keep your mouth shut. Answer only the questions they ask, NOTHING MORE! Don’t offer any additional information whatsoever. It may come back to haunt you.

Yes, it’s a kinder, gentler IRS these days, but when dealing with them, remember this: You can never be too sure, too prepared, or too quiet!

© 2004 Alex Goumakos  All rights reserved.

This article may be freely reprinted on your website or in your newsletter provided you follow these instructions.

If you'd like more information or would like to discuss this article personally with me, please write to me at alex@goldminetactics.com

See below for author information.



Start Building Your Dream Business Today!
Ever Wonder Why Some People Fail in Business While Others Seem to Have That Magic Touch?

Small business advice,  business tips, home business, self-employed tips, tax tips, sales tips, small business loans

Find out in:

Gold Mine Tactics®
The Business Owner's Success Manual


by Alex Goumakos CPA

Insider's Reference Guide Reveals the Winning Secrets Used By Highly Successful Business Owners to Increase Profits, Improve Cash Flow, Pay Less Tax and Accumulate Wealth

 

Click here to learn more


About the Author

Alex Goumakos CPA has over 20 years of experience helping business owners generate more revenues, earn higher profits and pay less tax. If you're ready to build a gold mine business, be sure to take advantage of his complimentary ezine loaded with professional-strength tips, strategies and tools to help turn your goals into RESULTS. http://www.goldminetactics.com/subscribe.htm

 

More Insider Secrets

 

Terms of Usage

 

Strategies for Small Business Success - Gold Mine Tactics
Strategies for Small Business Success - Gold Mine Tactics