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Tax

Virtual Tax Audits via Your PC Coming Soon

The only thing worse than tax preparation is the dreaded process of getting a Tax Audits and it could soon take place over a computer screen

The only thing worse than tax preparation in Miami is the dreaded process of getting a Tax Audits and it could soon take place over a computer screen in the comfort of your living room. Better hire a CPA to sit on the couch next to you.

Virtual Tax Audits

CPA’s advises clients in what could be an indication of things to come. Income tax preparation VieraCPA states the IRS launched a pilot program at the end of last year that allows taxpayers to use two-way video conferencing for assistance with tax questions and problems. Tax preparation business having been using this for consultation purposes for year, the IRS has caught on.

The Taxpayer Advocate Service, an independent watchdog arm of the IRS, is already calling for the agency to expand to virtual audits notes VieraCPA a Income tax preparation. The IRS says it needs to evaluate the success of the pilot program before making a decision.

Income tax preparation CPA’s notes theVirtual Tax Audits pilot program is currently being tested in 12 locations, where taxpayers needing assistance can log into a computer enabled with video-conferencing. They can then talk to an IRS agent who pops up on the screen to discuss whatever issues they’re having — whether it’s tax preparation or help with a tax form or a question about a refund.

TAS is also piloting a virtual assistance program. And VieraCPA stated that the tax preparation business and Certified Tax Preparer that this technology has the potential to “radically transform” the current audit process — eventually allowing taxpayers and tax preparers to use their personal computers to video conference with an IRS examiner.

To schedule an Virtual Tax Audits with an Income tax preparation or its client, the IRS would send a taxpayer a sign-in code so they could then log in to the meeting from a home or office computer. Documents could be transmitted by simply scanning them with a computer’s built-in camera notes Tax preparation business or a Certified Tax Preparer.

This could one day replace the need for correspondence audits, which are the letters the IRS currently sends taxpayers in the mail asking questions or requesting more information and their Income tax preparation Miami responding.

To save costs, the IRS has become increasingly reliant on correspondence audits instead of summoning taxpayers for in-person meetings says VieraCPA an Income tax preparation. But TAS says that these Virtual Tax Audits receive fewer responses and that many of the taxpayers dealt with these audits don’t understand how they work, default on payments and get hit with penalties.

Plus, with correspondence audits a specific representative typically isn’t assigned to a case, leaving many taxpayers without a point person to ask questions or to contact with concerns.

Virtual audits could eliminate the confusing paperwork and recreate a face-to-face meeting via computer. Tax preparation business or a Certified Tax Preparer Miami agree it would be easier to explain complex situations.

Doing this would also help taxpayers better understand why they are being audited and what additional information is needed, said Viera. It would also help the IRS obtain the accurate information it needs and help the agency view taxpayers as more than just tax returns.

The IRS’s virtual assistance pilot program is scheduled to continue through the 2012 filing season and end in May. Office locations include Colorado Springs, Colo., Fresno, Calif. and Utica, N.Y.

Once the program is completed, the IRS will evaluate its performance. So far, it said the pilot has allowed it “to maximize our current resources, by expanding hours of service in remote locations and balancing the workload in high-traffic areas.” But it wouldn’t say whether it is considering using this same technology for audits.

“The initial focus of Virtual Tax Audits delivery is on taxpayer service. We’re still in the middle of the pilot and still assessing the results,” the IRS said in a statement. “It’s premature to speculate about future steps.”

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Tax

Amended Return Will Not Trigger IRS

Tax Preparers state that filing an amended return generally do not increase their chance of being audited, an IRS manager said on October 19. Gustavo A Viera, Accountant in Miami, said it depends on the amended return and what is being amended but, that, in his experience, an amended return does not automatically trigger an audit. The IRS probably does not have the resources to audit every amended return.

If a taxpayer is chosen for an audit, Viera explained, it is better not to file an amended return after the audit starts. Chances are that the audit group will not get the amended return, and the filing will create confusion, he said. It is better to discuss any proposed change with the revenue agent conducting the audit, Viera said.

Most audits come through referrals or projects, according to Viera. The IRS does not conduct many random audits, Viera added. Referrals are reviewed by a group of managers, who decide whether an audit is appropriate. Viera indicated that the IRS conducts additional research when it receives a referral before opening an audit and does not take referrals at face value.

The most common issues that come up in audits include unrelated business income, employment taxes, intermediate sanctions, unfiled returns, revocation of the exemption and termination cases. The office conducts a lot of employment tax audits, Viera noted, and may request an IRS specialist to help out.

Viera primarily deals with large tax audits, involving taxpayers with $250 million or more in assets. An audit team of several agents will conduct the audit. The team may include specialists in areas such as employment taxes or tax-exempt bonds. In a large case audit, the IRS issues a Notice of Proposed Adjustment (NOPA) for every issue that it is contesting.

General program audits are conducted by a single agent, Viera said. IRS pointed out that, in these audits, the IRS provides a revenue agent’s report (RAR), rather than a NOPA. IRS indicated that some matters may show up in a NOPA that would not make it into an RAR.

Viera said that revenue agents prepare for an audit by looking at what triggered the audit, looking at the taxpayer’s website, conducting Internet research to look for articles on the taxpayer, and studying the organization’s Form 990 information return. The agent will focus on what the organization does and whether its activities have changed since it began and will scrutinize the numbers on the form.

IRS noted that an organization’s general counsel periodically will peruse its website to check on the accuracy of information provided and claims being made. Particularly for advocacy organizations, such as Code Secs. 501(c)(3) and 501(c)(4) organizations, it matters what is on the website, and the organization needs to take responsibility for it, she said.

The IRS issues information document requests (IDRs) to obtain information and documents from a taxpayer under audit. IRS said that some IDRs are clear; others may be overly broad; and responding comprehensively may be burdensome. She suggested talking to the IRS if the taxpayer has a problem with the IDR.

Viera said that open communication between the IRS agent and the taxpayer is important; if the taxpayer has a problem, talk to the agent or the group manager. Viera pointed out that, if he requests a particular document, there is probably an issue lurking behind the request and that, eventually, hhe will want to discuss that issue with the taxpayer. IRS asked about standardized IDRs. Viera replied that he stays away from that. His IDRs are very focused, with one issue per IDR.

In a team exam, taxpayers and the IRS attempt to resolve issues as the audit is being conducted, according to Viera. In a general program audit, attempted resolution may not come until the end, at a closing conference, she indicated. Viera said that an issue should not be a surprise. A taxpayer who is unclear about the issues should ask the agent, and the agent should identify the issues.

The IRS will generally assess penalties if the taxpayer owes additional taxes, Viera said. The IRS puts the taxpayer on notice, and gives the taxpayer an opportunity to argue good faith and reasonable cause. He added that the IRS tries to be reasonable and noted that, if a taxpayer makes an error and confesses, the IRS may be more lenient on penalties.

Some audits terminate with a closing agreement, but these can be time-consuming, Viera said. The IRS will try to resolve the audit through the revenue agent’s report, rather than a closing agreement. However, fast-track mediation is faster than the normal process and may involve an expedited closing agreement.

If the issues are not resolved, the taxpayer can file a protest and ask IRS Appeals to look at the case. The IRS agent will read the protest and may file a rebuttal, Viera added. IRS said that the taxpayer should get a copy of the rebuttal, but the IRS does not always provide it.

Viera said that, if the IRS has enough information on an issue, it will take an aggressive position in the audit. Issues do not just go away.