Topics Covered:

1. IRS Agent Seduced Me, Then Didn’t Help Me With Audit, Oregon Man Claims.

2. Your worst nightmare: An IRS audit. What the tax man looks for.

3. Questions from our listeners:

a. I received an IRS Notice informing you that your return has been selected for examination. What should I do?

b. Why should I be concerned if an audit is poorly conducted?

c. How is using a tax attorney beneficial during an audit?

d. What does your firm do for an audit representation?

e. Why would I not want my original tax preparer to represent me in my appeal (or in my audit)?

f. How many years worth of returns are at risk during an audit?

g. What will happen if I do not respond to the taxing authorities audit notice?

h. What is the worst that can happen if I choose to represent myself in an audit?

4. Know What The IRS Is Looking To Attack By The Type Of Audit Being Conducted.

____________________________________________________________

Yes we are all working for the tax man!

Good afternoon! Welcome to the KahnTaxLaw Radio Show

This is your host Board Certified Tax Attorney, Jeffrey B. Kahn, the principal attorney of the Law Offices Of Jeffrey B. Kahn, P.C. and head of the KahnTaxLaw team.

You are listening to my weekly radio show where we talk everything about taxes from the ESPN 1700 AM Studio in San Diego, California.

When it comes to knowing tax laws and paying taxes, let’s face it — everyone in the U.S. is either in tax trouble, on their way to tax trouble, or trying to avoid tax trouble!

It is my objective to make you smarter so that you legally pay the least tax as possible, avoid tax problems and be aware of the strategies and solutions if you are being targeted by the IRS or any State tax agency.

Our show is broadcasted each Friday at 2:00PM Pacific Time and replays are available on demand by logging into our website at www.kahntaxlaw.com.

I have a lot to cover today in the world of taxes and helping me out today will be my associate attorney Amy Spivey who will be calling in later in today’s show.

IRS Agent Seduced Me, Then Didn’t Help Me With Audit, Oregon Man Claims

Vincent Burroughs who lives in Oregon was selected by the IRS for an audit of his tax returns. Little did he know that the IRS was going to clean him out in more ways than just his bank account.

Let me explain – maintaining a friendly but professional demeanor can be important to an audit or tax dispute. But having sex with a government agent for a better audit result – well not such a good idea. Yet a lawsuit involving an allegedly alluring—and demanding—female IRS agent suggests that sometimes facts and figures can become overwhelming. If you believe the plaintiff, Mr. Burroughs, passion it seems can overtake a tax audit.

Unlikely? I agree. Preposterous? Perhaps. But Mr. Burroughs filed a lawsuit against the IRS alleging that IRS Agent Dora Abrahamson threatened him with penalties in his tax audit if he did not – let’s say, come across. And in this lawsuit Mr. Burroughs was seeking punitive damages.

For a long time Mr. Burroughs said, he was making good money as a contractor. But when the economy hit the skids, his business dried up, quashing his hopes of becoming a full-time motorcycle racer. He got behind on his taxes — by about $20,000, he figured.

Then in August 2011, he was selected for an audit by the IRS. IRS Agent Dora Abrahamson was assigned to the audit. She allegedly told Burroughs that “she knew who he was, and that it was lucky for him that this was the case, and that they should meet”. Ms. Abrahamson allegedly flirted with him over the telephone and via text messages offering him massages and sent him a photo of herself in her underwear – not exactly IRS-approved business attire – and in a suggestive pose.

Mr. Burroughs maintains that he initially ignored her advances until September 2011. That’s when Ms. Abrahamson arrived at his home for an arranged audit meeting. Only she wasn’t dressed much like an IRS agent. Mr. Burroughs said she showed up dressed provocatively and proceeded to proposition him threatening a 40% tax audit penalty if she didn’t get what she wanted.

The interview with ABC News

Mr. Burroughs was interviewed by ABC News.

Like many other taxpayers, Mr. Burroughs said that when he found out he was being audited “he started shaking immediately. His heart rate went up. He was looking to cooperate with the IRS as much as he could.”

But IRS agent Ms. Abramson assured him that she was most eager to help out.

Mr. Burroughs stated, “She was sending me texts. Some of them made me feel like, I am lucky that she has got my audit, ’cause she is gonna help me. Then, some of them made me feel like, I think this girl wants something else.”

A week or so after the audit began, Mr. Burroughs said, he hadn’t gathered the papers he needed. He said Ms. Abrahamson asked about stopping by to give him a hand. He agreed.

So in September 2011, at 9:00 p.m. on a warm night in Eugene, Oregon, Mr. Burroughs said he opened his front door to IRS agent Dora Abrahamson. It was the first time the two ever met.

Mr. Burroughs said in the interview with ABC News that “she said she was going to do my paperwork. She came up the stairs, knocked on the door and I opened the door”.

That’s when the encounter allegedly occurred.

Mr. Burroughs described in greater detail what happened –“She just pushed me back, and I kind of went back, and I landed like that, and she immediately came over, got on top of me, started kissing on me. … [T]hen she leaned up and started tearing my shirt off.”

Mr. Burroughs said they then went into his bedroom.

That was Mr. Burroughs’ interview with ABC News. But let’s get back to the story and what happened after that encounter at Mr. Burroughs’ home.

Mr. Burroughs said that he received a call from Ms. Abrahamson informing him that she was stepping down from his audit due to a “conflict of interest”. A new IRS agent was assigned who came up with a report that Mr. Burroughs owed not the $20,000 he figured – but that Mr. Burroughs owed around $69,000!

Mr. Burroughs was not happy. He said, “somebody has to be accountable for what the IRS does, because they are unaccountable. They run with no leash on”.

Fifteen months go by . . .

Now not that the story isn’t already bizarre enough, but also raising eyebrows is the lack of formal protest. In the fifteen months that transpired after the encounter, Mr. Burroughs doesn’t seem to have made any form of complaint to the IRS or law enforcement in spite of his claims to have suffered much over the incident. But all that changed when, seemingly out of nowhere, in January 2013 he filed suit in the U.S. District of Oregon, Eugene Division (Burroughs v. Abrahamson et al (6:13-cv-00141-TC)). 

In his lawsuit, he says he suffered “anguish, humiliation, mental distress, depression, lost income, and loss of trust in governmental authority.” At the time of the encounter with Ms. Abrahamson, he was in an “exclusive relationship with another woman,” he said, and because of the demanding IRS agent, that relationship also suffered.

He calls Abrahamson’s behavior “persistent sexual harassment” and says, among other things, that she was negligent in “permitting her carnal desires to overcome her judgment that it was inappropriate to pursue a sexual relationship with a taxpayer she was auditing.” Her advances, the complaint alleged, “were an excessive intrusion on his person.”

In the lawsuit he was seeking unspecified punitive damages.  The lawsuit claimed that Ms. Abrahamson’s conduct caused the plaintiff distress and a rift in his relationship with a “significant other”.

The lawsuit also alleges that the government is liable for damages because IRS officials provided inadequate supervision. I guess Mr. Burroughs was expecting a ménage à trois?

Well if you are the subject of an IRS audit or are looking to avoid an IRS audit, you need to stay tuned.

You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.

Calling into the studio from our San Francisco Office is my associate attorney, Amy Spivey.

Chit chat with Amy

Your worst nightmare: An IRS audit

You business is growing and you are prospering. Business is good. Life is good. Then the unbelievable happens, which turns your world upside down and pushes you into pure panic.

This panic mode is instantly brought on by receipt of an IRS audit letter.

Most of us don’t fear something exploding or catching on fire as much as we fear an IRS audit.

Of course, the best way to survive a tax audit and even to come out of it successfully is not to panic, but to prepare.

Amy, what are your thoughts on this?

Take it seriously

Even though IRS audits are fairly routine events, they should be taken with the utmost of seriousness.

In the event you receive an audit letter, you should immediately spring into action to ready yourself for the audit.

The IRS usually sets the time and place for the audit. If you try to put it off, any penalties and interest will just become that much bigger.

If you choose to represent yourself, you should amend your schedule to comply with their date. Think of not showing up for an audit the same as not showing up for trial in a courtroom. It is that serious.

Jeff, says that’s a good way of approaching this.

Now Amy, is there anything worse you could get from the IRS than a standard or routine IRS audit letter?

The really, really bad news

Amy replies, you can be investigated by the IRS through a civil tax audit (which is very serious) or through a criminal investigation (which is even more serious).

The criminal investigation arm of the IRS can come bearing badges and guns, as it is an investigation of fraud against the United States government.

In any such investigation, the IRS can (and probably will) obtain your bank records and other financial records, both business and personal.

Virtually all small businesses involve close ownership with profits or losses going ultimately to the business owner. This is why the IRS looks closely at your personal accounts.

Any instance of depositing unreported income in a bank account will probably show-up in an IRS audit.

Jeff asks, is there any difference in the audit selection process of small businesses based on who prepares the tax returns?

Amy replies, Small businesses which prepare their own tax returns (as opposed to going through a tax professional such as a CPA) are more likely to be audited.

Jeff asks, so why does the IRS exercise extra scrutiny over small businesses?

Why me?

Amy replies, The IRS especially scrutinizes the self-employed because the agency claims that most tax cheating is done in small businesses.

There is some logic to this because, in a self-employed business, there are many more opportunities to blur the difference between business expenses and personal expenses.

Also, many self-employed people put the idea of proper record-keeping and the cost of hiring accounting and tax professionals at the bottom of their priority list.

It is not uncommon for business owners to concentrate more on the operational side of the business than to properly accounting for the true business expenses and deductions.

Jeff states, Yes it is a statistical fact: Self-employed individuals are much more likely to get audited than regular employees.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Jeff asks, what does an IRS auditor look for when he or she audits you and your business?

What the tax man looks for

A tax auditor is looking for certain things when they audit you and your business.

The IRS training manuals note that the auditors are examining you and not just your business tax return.

Your lifestyle may be checked against your reported income to see if there is a discrepancy which shows skimming, diversion of funds or deception.

That mansion with the truckmount van parked out front may send up the wrong “economic reality” flag.

Jeff says, well I know a deduction aggressively examined by IRS is Travel and entertainment deductions. What can you tell us about that?

Amy replies, Travel and entertainment deductions in a business are usually suspect as some people try to deduct personal entertainment and meal “business” expenses.

You must be able to clearly explain the business relationship in a credible fashion.

Taking your friends out to the ballpark or taking the family on a vacation to that industry conference may not quite pass the litmus test of an audit.

Writing off your legitimate business entertainment expenses requires detailed explanation of the reason for the expense, as well as a receipt.

Jeff says, I know that for most business owners their business revolves around scheduling on their calendar. How does the IRS look at this?

Amy replies, Your calendars will undoubtedly be scrutinized to make sure there are no glaring gaps between possible work, vehicle or equipment usage and the income reported.

As an example: If you are claiming 100% business vehicle usage but your calendars do not confirm the times and locations of service stops, you may be open to an analysis of possible personal use of the vehicle.

Entries in a business diary or calendar help to justify an expense to an auditor as long as it appears to be reasonable.

Jeff says, I know that most business owners pay for business expenses using a credit card. How does the IRS look at this?

Amy replies, Business credit cards are also highly scrutinized as they have a high potential for misuse (such as use for a personal vacation or personal expenses).

Keep these only for legitimate business expenditures (places where company checks won’t do).

Too many times a small business owner says that they will “reimburse the business later” for that personal expense put on the business card.

Jeff, says well that routine just opens you up for closer inspection.

Professional help

Jeff says, if you have a tax professional representing you in an IRS audit, your representative may recommend that you not attend the actual audit conference. A tax professional knows how to handle the questions much better than you do and directly address the issues set forth in the audit letter.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Stay tuned because after the break we are going to answer your top questions on IRS audits.

You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team.

And on the phone from our San Francisco office I have my associate attorney, Amy Spivey.

Top Questions On IRS Audits

If you would like to post a question for us to answer, you can go to our website at www.kahntaxlaw.com and click on “Radio Show”. You can then enter your question and maybe it will be selected for our show.

So Amy what questions have you pulled regarding IRS audits?

Amy to ask question and Jeff to respond.

1. I received an IRS Notice informing you that your return has been selected for examination. What should I do?

The fact that your return has been selected for examination, it does not mean or imply that that you have made an error or done something dishonest. Tax returns are selected for audit in a variety of ways including random sampling. The most important thing is not to panic and instead to reach out to a tax attorney for representation. Provide us with your audit letter and the subject tax returns so we may review your situation.

2. Why should I be concerned if an audit is poorly conducted?

A poorly conducted audit can result in large additional tax adjustments and penalties and interest up to as much as 100% of the adjustment. Most local tax preparers are not equipped to represent you in an audit before the IRS. Because we focus on tax representation, we can make sure that your audit is efficiently and effectively handled and attempt to pursue an audit result with little or no additional tax assessments. We can handle everything from simply submitting missing tax documents to representing you in front of an IRS examiner. Let us do the work for you.

3. How is using a tax attorney beneficial during an audit?

Using a tax attorney to help with an audit can significantly increase your chances of getting a better outcome. Many times individuals don’t realize that audits can go both ways, you may actually end up being owed money after an audit. A tax attorney can analyze your situation and find the best approach to take in order to get the best outcome. The IRS actually prefers working with professional tax representatives because it makes their job easier and helps the process move along more efficiently, which can actually result in a more favorable decision.

4. What does your firm do for an audit representation?

Upon filing a Power Of Attorney Form with the IRS or State Tax Agency, we become the primary contact for the tax agency. You will still receive copies of all correspondence sent out by the tax agencies but you will not be receiving any calls or visits from the agent(s). In connection with the audit we will research any issues that are likely to come up, respond to the agent’s arguments by coming up with answers on your behalf, meet with the agent in person if required on your behalf, negotiate and settle taxes owed if you end up owing more money during the audit and cannot pay, and handle any unforeseen issues that may arise during the audit.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

5. Why would I not want my original tax preparer to represent me in my appeal (or in my audit)?

One of the most effective defenses to the imposition of penalties and the associated interest on the penalties available to Tax Counsel, is to argue that the taxpayer relied on a tax professional in the preparation of the return at issue. This creates a potential conflict of interest between you and your original tax preparer where your interest is to protect yourself financially and your original tax preparer’s motivation may be to protect his reputation with the IRS. It therefore becomes highly unlikely that even where appropriate to do so, your original tax preparer will throw himself under the bus by admitting his errors in preparing the returns at issue for your financial benefit to his possible detriment with the IRS including the possibility of preparer penalties and detriment to his professional reputation with the IRS. No such conflict exists where you engage Tax Counsel that did not prepare the returns at issue to prosecute your Appeal.

6. How many years worth of returns are at risk during an audit?

Ordinarily, the IRS has three years from a tax return’s due date or filing date, whichever is later. However, this limitation does not apply when there is an allegation of fraud, when no return was filed, or when the taxpayer is charged with a substantial omission or concealment of items of gross income. Because an audit conducted for one tax year can trigger other tax years and can result in scrutiny of other tax deductions not originally stated in the audit letter, you should take this matter seriously and engage an experienced tax attorney to represent you.

7. What will happen if I do not respond to the taxing authorities audit notice?

Because the taxpayer has the burden of proof to prove claimed deductions, failure to respond to an audit notice usually results in the denial of these deductions leading to the charge of additional taxes along with interest and penalties. If left unchecked, an ignored audit notice and failure to pursue any appeal will result in a final assessment. Once an assessment becomes final, the IRS will start the collection process action that can eventually lead to wage garnishments, liens, levies and seizure of property.

8. What is the worst that can happen if I choose to represent myself in an audit?

Tax agents are aggressive by nature and left unchecked could potentially reach a determination that is unreasonable and inconsistent with the applicable facts and circumstances of your case or their determination may be based on erroneous applications of law. An experienced tax attorney will be able counter a tax agent’s aggressive nature, deal with the complex technical issues that arise during an audit and be an advocate on your behalf as to any factual or legal issues that arise during the examination.

Using a tax attorney to help with an audit can significantly increase your chances of getting a better outcome. Many times individuals don’t realize that audits can go both ways, you may actually end up being owed money after an audit. A tax attorney can analyze your situation and find the best approach to take in order to get the best outcome. The IRS actually prefers working with professional tax representatives because it makes their job easier and helps the process move along more efficiently, which can actually result in a more favorable decision.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

We have more on what you need to know about IRS audits so stay tuned. You are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team on the KahnTaxLaw Radio Show on ESPN.

BREAK

Welcome back. This is KahnTaxLaw Radio Show on ESPN and you are listening to Jeffrey Kahn the principal tax attorney of the kahntaxlaw team along with my associate attorney, Amy Spivey.

Know What The IRS Is Looking To Attack By The Type Of Audit Being Conducted

The IRS randomly selects tax returns for audit each year. Depending on what deductions you’ve taken and other characteristics of your tax return, your tax return can have a higher probability of being selected for an audit.

Here’s what you need to know about IRS tax audits. There are three types of audits:

Jeff to announce type of audit and Amy to explain.

Correspondence Audit:

This is the least severe type of audit. It involves the IRS sending a letter in the mail requesting more information about part of a tax return. For instance, the IRS may have questions regarding charitable deductions and request you send in receipts to substantiate your deduction. If you have the receipts or information it’s generally not an issue. If your tax return is legitimate and you have the data to back up any claims on your return, you may be able to handle the situation on your own.

Office Audit:

If the IRS has more questions about your return, then you’ll get a letter in the mail inviting you into an IRS office for the audit. The office audit is more serious, so you should always have a tax representation professional come with you or turn over the audit representation to him. A tax representation professional can gather information in advance of the meeting and make sure it is complete so that the office audit can be wrapped up with the IRS as quickly as possible. If the IRS still needs additional records, your representative can secure additional time to supply the missing information.

Field Audit:

This is the most serious type of audit and involves the IRS agent visiting you at your home or your business. The reason the field audit is more serious is the IRS agent will ask to see other things. The agent does not want to limit the audit to particular items. -While there are much fewer field audits than office or correspondence audits, I wouldn’t let any client go into a field audit without representation. It’s the most serious level of audit. If they are coming out to you, they are looking for something.

If any part of your return worries you and the IRS is breathing down your neck, you should bring in a tax representation professional to help curb any worries or fines. Taxpayers have a tendency because they have no experience dealing with the IRS to say way too much, give away too much and admit too much. You don’t want to give the agent information the agent has not asked for.

Jeff says, Using a tax law firm to help with an audit can significantly increase your chances of getting a better outcome. Many times individuals don’t realize that audits can go both ways, you may actually end up being owed money after an audit. A tax law firm can analyze your situation and find the best approach to take in order to get the best outcome. The IRS actually prefers working with professional tax representatives because it makes their job easier and helps the process move along more efficiently, which can actually result in a more favorable decision.

PLUG: The Law Offices Of Jeffrey B. Kahn will provide you with a Tax Resolution Plan which is a $500.00 value for free as long as you mention the KahnTaxLaw Radio Show when you call to make an appointment. Call our office to make an appointment to meet with me, Jeffrey Kahn, right here in downtown San Diego or at one of my other offices close to you. The number to call is 866.494.6829. That is 866.494.6829.

Thanks Amy for calling into the show. Amy says Thanks for having me.

Well we are reaching the end of our show.

You can reach out to me on Twitter at kahntaxlaw. You can also send us your questions by visiting the kahntaxlaw website at www.kahntaxlaw.com. That’s k-a-h-n tax law.com.

Have a great day everyone!