IRS Business Office Audits

Currently, IRS office audits are conducted on small businesses or other individuals. My audits are mostly small business audits and face to face with an auditor.

The newer auditors are better trained and educated than the auditors of the past. They are also very professional and have the usual checklist of items to review before slicing into the meat of the audit.

Do you barter or trade-in your business? Did you file the required 1099 forms? [and should they be on payroll instead?] How much money do you have on hand, at home, in the business, in a safe?

I once asked why it was important and if they could actually look in a safe to count funds and they just said, 'Yes". Then they get into the nitty-gritty of income [ Did you bring all of your bank statements for the year?] and deductions.

One important item is the Patriot Act which requires banks to file a Suspicious Activity Report [SAR] if anybody cashes a check or other instrument for ten thousand or more. The bank is furthermore not allowed to inform you that it was submitted to Homeland Security and the IRS.

This document, under the guise of money laundering or terrorist activities, mysteriously shows up on the computer when the auditor asks about, "Did you cash check from for SS on this date? [and show me how you included it in income].

* Phillip B Chute is an Enrolled Agent, tested, licensed, and appointed by the IRS directly. He has prepared or supervised over 25,000 tax returns over 30 years.