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IRS Audits and Examination

Full IRS Tax Audit Representation Services

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IRS audit defense guide — Brotman Law

Key Takeaways What is tax audit representation? How can IRS tax audit representation benefit me? Why choose Brotman Law for IRS audit representation? A full audit representation service from beginning to end Contact us about our IRS tax representation services now If you get an audit notice, a tax attorney can develop strategies to safeguard your interests and reduce penalties. Most taxpayers are far … Read more

How to Work with Brotman Law on Your IRS Collections Case

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How to Work with Brotman Law on Your IRS Collections Case

Key Takeaways

  • The biblical tale of David and Goliath is certainly inspiring and does much to instill the belief that you can overcome any opponent, no matter how much they out-size, out-weigh or out-spend you.
  • Unfortunately, this is not a fair comparison to use for someone going nose-to-nose with the IRS.
  • I am not saying that you should just roll over and play dead if the IRS informs you that you owe taxes with penalties and interest tacked on.

The biblical tale of David and Goliath is certainly inspiring and does much to instill the belief that you can overcome any opponent, no matter how much they out-size, out-weigh or out-spend you.

Unfortunately, this is not a fair comparison to use for someone going nose-to-nose with the IRS.

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Tax Return Demand from the FTB Intensifies

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{{cta(’09b64408-9310-4451-9a41-0234b45d370e’,’justifyright’)}}Are you a marketplace facilitator or out-of-state business who has received a tax return demand from the California Franchise Tax Board? If so, read this before you respond. We’ve provided the essential background information you need to formulate a plan prior to your response.

Key Takeaways

  • The most pervasive aspect in our experience is California will be as aggressive as possible in the assessment and collection of taxes.
  • You may be familiar with the Supreme Court’s decision in Wayfair v.
  • Economic nexus is the principle that a certain amount of economic activity within a state can trigger enough minimum contacts for that state to be able to assert jurisdiction over a business and su…

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Federal Payroll Tax: What the IRS Expects from Business Owners

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Federal Payroll Tax

federal payroll tax

Key Takeaways

  • If you have employees, you are liable for federal payroll taxes. Some taxes are withheld from your employee’s wages, some you must pay yourself.
  • The IRS administers the Internal Revenue Code, which means it is in charge of income and payroll taxes for the entire nation.
  • Federal unemployment tax helps fund state workforce agencies including the EDD. It also pays those who have become unemployed as a supplement to state assistance.

If you have employees, you are liable for federal payroll taxes. Some taxes are withheld from your employee’s wages, some you must pay yourself.

The Internal Revenue Service, or IRS, administers payroll taxes as part of its responsibilities. Remaining in compliance means understanding how and when payroll taxes are calculated, filed, and paid.

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What is Reasonable Compensation?

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One of the recent hot topics with respect to the IRS audits has to do with auditing S corporations[1] (and those taxed like an S, such an LLC) for not paying their employee/owners “reasonable compensation. According to the IRS “S corporations must pay reasonable compensation to a shareholder-employee in return for services that the employee provides to the corporation before non-wage distributions may be made to the shareholder-employee” (IRS.gov, “S Corporation Compensation and Medical Insurance Issues,” 8/31/2013).

Key Takeaways

  • The reason for the increasing prevalence of S corporation reasonable compensation audits is because a number of taxpayers were forming S corporations to avoid the self-employment tax that would be otherwise charged on their net income.
  • The IRS bases their authority to audit S corporations for reasonable compensation on multiple federal court cases.
  • Determining reasonable compensation must first be established by evaluating what the shareholder-employee did for the S corporation. To best understand the role of the shareholder-employee, the IRS examines the source of the S corporation’s gross receipts.

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How to Audit-Proof Your Tax Return (almost)

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Full disclosure here, the IRS does not reveal the exact criteria that it uses to audit a tax return. However, this closely guarded statistic is not so much of a secret anymore. Not surprisingly, the government uses statistics to analyze tax returns and to determine which taxpayers it selects for IRS audits. Shameless self-promotion alert: I have also written a pretty comprehensive list of the factors that the IRS that are known by tax attorneys as “audit red flags.” However, in this post, I want to discuss perhaps the most important factor in avoiding an IRS audit: essentially making it bulletproof from the scrutiny of the IRS.

Key Takeaways

  • Full disclosure here, the IRS does not reveal the exact criteria that it uses to audit a tax return. However, this closely guarded statistic is not so much of a secret anymore.
  • Here’s a quick recap about how IRS audits work. All tax returns are processed into a computer, where they are assigned two scores: a DIF score (assessing the potential changes on a tax return [i.e.
  • The fact of the matter is that the IRS can only conduct a certain amount of IRS audits per year, so it selects the tax returns that are most likely to yield revenue or that contain the greatest potential for error for additional review.

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Why the IRS Audits Tax Returns?

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The Examination Division of the Internal Revenue Service is responsible for auditing federal tax returns to determine if income, expenses, and credits are reported accurately. Although the IRS accepts most tax returns when filed, there are circumstances that warrant an audit. Within this context, the IRS is motivated to evaluate those areas of a tax return that fail to comply with current policies and provisions. In general, the IRS motivation behind auditing taxpayer returns falls under multiple categories.

Key Takeaways

  • The Examination Division of the Internal Revenue Service is responsible for auditing federal tax returns to determine if income, expenses, and credits are reported accurately.
  • First, the IRS is motivated to audit returns for the purpose of finding unreported income. In conducting both random and strategic audits, the “IRS has taken a renewed interest in finding unreported income” (Kane, p. 4).
  • Second, the IRS Examination Division is motivated to audit returns to ensure customer service goals are met; these goals are specific to applying the provisions of the Taxpayer Act.

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Brotman Law Featured in Inc. Magazine - Fastest Growing Law Firm in California