Accounting Articles > Federal Income Tax:

Comprehensive tax return problems

I’ve had all of these referred to me in the past:

• The Internal Revenue Service or The Illinois Department of Revenue is auditing an income tax return that’s just plain wrong in so many areas, even the agent doesn’t know where to start. Generally this occurs when a customer makes the mistake of trying to do their own accounting and tax work.
• Or the client tried to do the accounting work, and went to some bad excuse of a tax guy who actually accepted the client’s work and banged out a tax return that’s just wrong.
• Of course my all time favorite is when you just plain had a lousy accountant that didn’t know what they were doing and you didn’t take the time to look at the return in the first place.

However it happened, here we are and what do we do?

Unless you are public enemy number one, there is generally some type of defense that will save you in some direction. But there are several points that need to be made:

1. Don’t try to do this yourself. Your most basic right as a taxpayer is the right to representation. You need a mouthpiece. Many people think that if they hire an accountant to represent them, that the IRS agent will automatically assume that they did something wrong, and that the agent will come after them even harder. WRONG. The Agent would much rather deal with a tax professional that knows the rules rather than an emotional taxpayer.
2. If a tax proceeding is part of an on-going criminal investigation, then there is probably very little that anyone can do for you. Many times, if they can’t get you on a criminal charge, they will come after you for tax evasion. If they can prove that an amount of money came to you, then all they have to do is look at your income tax return. If it isn’t on your return, then you have evaded income tax.
3. If you have excluded income from your return or over-deducted your expenses, then the main thing to do is damage control. This can be done by trying to get as much of the sales excluded from the return or by coming up with some sort of defense on the deductions. Either way, we certainly don’t want them to open up additional years, although depending on the problem, they probably will. The really big thing on this is making sure that the agent doesn’t believe that there is any criminal intent on the part of the taxpayer. Tax law is the only category of law where intent is literally 9/10’s of the law. If the agent can prove intent on your part, then a nightmare may follow.

Whatever the problem or the circumstance, you need representation. Call today.