Audit & Amending Returns

[Andrea M]

A client is under audit for 2013. It's looking like they're probably going to have to return the refund for that year because of loss limitation rules. It also looks like losses for 2014 & 2015 should not have been taken, so those will need to be amended. The question is:

a. Amend 2014 & 2015 now, or

b. Wait until 2013 audit is complete to tackle the amendments for 2014 & 2015?

Thanks in advance...

[Max W]

If you wait, the audit could be expanded to include 2014 and possible 2015.

What  stage is the audit in? This could be important if you need more time to prep the amended returns.

Are you representing the client in the audit?

 

 

[RitaB]

I would recommend to the client to amend and pay 2014 and 2015 taxes owed ASAP to limit interest and penalties.  This is what I'd do whether or not 2013 was being audited.  I wouldn't try to guess at what IRS is going to do, or how long they will take to do it - just do what should be done to file correct returns.

[Andrea M]

I'm representing the client; I prepared their returns and they called me in a panic when they received the notice.

Apparently, I'm not as stupid as I think I am. I had someone review the returns and they didn't find any errors. They're confident that I took the losses the client was entitled to. They reviewed my basis calculations and all looks fine. And the colleague doesn't see where amendments need to be filed.

This is my first ever audit and I'm a bit nervous and was losing sleep over this and reading horror stories on the internet and second guessing everything I did, but all my numbers have backup and are defendable.

The IRS auditor went to visit the client this week and he was impressed that they have adequate procedures in place; segregation of duties; files properly secured; No evidence of fraud! I now need to provide a copy of QB, Basis Calc, and support for COGS and Other Expense.

I do need to have the client sign an audit engagement letter.

Thanks for all responses!

[Abby Normal]

Congrats and best of luck! We expect an update.

[michaelmars]

DON'T give a copy of quickbooks.  give a printout of the g/l tb etc.

[Abby Normal]

4 hours ago, michaelmars said:

DON'T give a copy of quickbooks.  give a printout of the g/l tb etc.

http://www.journalofaccountancy.com/issues/2012/jan/20114540.html

Regs. Sec. 1.6001-1(e) requires the taxpayer to make these records “at all times available for inspection by authorized internal revenue officers or employees, and shall be retained so long as the contents thereof may become material in the administration of any internal revenue law.” Rev. Proc. 98-25 clarified that the IRS has a right to electronic records.

[michaelmars]

Quote

 

yep and you can give print outs to support your items.  Most agents will accept this and move on.  I would never give up the electronic file on a basic request.  It can get subpoena'd but how many agents would go through this for a small business as long as you support your records in other ways.   Also it depend if you or your client did the write-up.