How to respond to discoveries of tax return errors

Article Abstract:

Accountants are often faced with a dilemma upon discovering that the previously filed tax return of a client either underreported income or overstated deductions. This situation may occur in relation to the dissolution of a marriage, a corporate breakup, a loan application, a civil audit or criminal investigation of the client. However, it may also arise from the exercise of the conscience of the client after a length of time elapses. When accountants propose the filing of a precise revision of the return and decide to terminate the relationship with a client who refuses to do so, they run the risk of unnecessarily losing a client or exposing the client to either civil or criminal penalties. An amended return waives the Fifth Amendment right against self-incrimination and may even require accountants to testify against their client. Accountants should ask their client to consult with a tax attorney to keep the right to confidentiality.

Practice, Tax assessment

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Get the best deal for clients from the IRS Collection Division

Article Abstract:

Tax accountants can help clients with outstanding tax liability to negotiate with the powerful IRS Collection Div by following certain guidelines. Tax consultants should first hold a meeting with their client to find out what led to the tax liability, determine tax years involved, review all notices, ascertain if all returns were filed, study tax liability and limitations period, educate their client, get power of attorney, obtain IRS transcript, evaluate state and local tax liabilities, and verify fee arrangement. They should then formulate a strategy, which involve such options as request for IRS audit reconsideration and penalty abatement, full payment, loan, sale of assets, and initiation of offer-in-compromise. They should then negotiate by calling the IRS, explaining what happened, offering a solution, addressing levy release and tax lien, and dealing with unprofessional behavior by IRS official.

Tax appeals

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Practical tips on preparing for and dealing with the IRS

Article Abstract:

Guidelines that tax practitioners may use in representing a business client before the IRS are presented. Preparation for a possible IRS examination should be made while the return is being completed. If the return will include certain items that could result in more taxation in the event that the IRS successfully challenges it, the practitioner should inform the client immediately by making a letter. The probability of a corporate return being examined can be reduced by making the Schedule M-1 adjustments clear and easy to understand. Form 8275, or Disclosure Statement, can be used for avoiding the 20% accuracy-related penalty provided for in Sec. 6662. Tax practitioners should make it a point to develop a professional relationship with the IRS agent. Cooperation, lack of emotionality and professionalism are key to such a relationship.

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