The IRS Audit Blog

Archive for April, 2008

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Question: How do you file a complaint against a Tax Auditor?

We were recently audited by the IRS, and the auditor was abusive and ignored information proving that we did not make the income she claimed we did. How can I file a complaint against her, and with whom?

Answer: The Taxpayer Advocate Service was established to assist taxpayers like you. It is a separate organization within the IRS that assists taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should.

http://www.irs.gov/advocate/index.html

IRS planning to beef up oversight of paid tax preparers

Most of us don’t do our own tax returns. My husband did ours for years. He finally surrendered, too frustrated with the never-ending task of keeping up with the many changes to the tax code. We now pay a professional, and it is money well spent to pass on the aggravation to someone else.

Interesting Encounter With IRS Auditor

Question: Flex Spending Account – DATE OF SERVICE or by DATE OF PAYMENT.?

I recently signed up for an FSA Flex account with my employers new outsourcing company. The FSA account started Nov 1 2009 and ends Oct 31 2010, so my wife had surgery in Sept 2009, so I submited our insurance deductable amounts that has been payed in November 2009, to claim them.

The outsourcing company said that

Per our FSA plan, the expenses have to be incurred in the benefit plan year. The dates when the expenses are paid, are not considered, and only the date of service.

I read on the IRS website
As per IRS publication 502 – “You can include only the medical and dental expenses you paid this year, regardless of when the services were provided.”

Can the outsourcing company choose what they are going to cover by DATE OF SERVICE or by DATE OF PAYMENT.

HELP!

Answer: FSAs use service date and plan year. In this case, your start date is 11/1/2009. You cannot use the money retroactively. No tax benefit is supposed to work retroactively.

Since you will have to pay the money in 2009, you can itemize it on schedule A if the amounts are high enough to make a difference. The schedule A goes by date of payment.

Health accounts work, but the details may make you ill

Health flexible savings accounts make sense, but they sure are a pain. And they’re changing. IT’S ONLY MONEY tells you how to approach them this open-enrollment season.

Proposed rules for tax preparers get industry support

New rules that the Internal Revenue Service has proposed for tax-preparation workers could make the industry more reputable, according to the owner of one Montgomery tax firm.

momoney.wmv

Question: Have you been audited for reporting a loss on your self directed IRA?

I invested in real estate in 2005, but need to sell in 2009 or 2010. I believe the net loss will be aproximately 20k. I am worried that reporting that large of a loss will trigger an IRS audit, and I am wondering if anyone else has had a similar experience. I could hold on to the property for a few more years but it is steady losing money, and I sort of want to be done with it.
Yes I agree this is a rare occurrence. It is a self-directed IRA, not a traditional IRA.

Answer: Unless you have cashed in all your IRAs in the year of sale (assuming this is a traditional IRA – ALL traditional IRAs),and you have a net loss of ALL IRAs, you will not have a taxable loss at all.

It will not be reported on your tax return at all.

Helen, EA in PA

Avoid these common tax errors and audit triggers

No business wants to have its tax returns examined any more closely than necessary. Here are some of the most common errors businesses make when filing their taxes.

Question: Do I need a denial for unemployment before I send for an 1799/SS-8 appeal for denial or not?

I am a 1099 worker that worked in an office and got paid hourly through them. I was recently laid off. I was told I need to fill in a SS-8 form and send it to the IRS to see if I my employer was to pay unemployment benefits. Do I need to submit my unemployment claim first? Or do I send in the SS-8 form first, then contact unemployment/EDD?

Answer: I’d file both right away. If you wait to file for unemployment until after you get the SS-8 decision, it could be long enough that it would decrease your benefit because of not having worked recently.

Be prudent when picking a tax preparer

Be prudent when picking a tax preparer

IRS Appeals – IRS Collection Appeals