"Compliance Research Examination"

[Jack from Ohio]

Dear CLIENT NAME:

Your federal income tax return for the year shown above has been selected at random for a compliance research examination.We must examine randomly selected tax returns to better understand tax compliance and improve the fairness of the tax system. If we find any errors during the examination, we will give you the opportunity to explain them. The results of this and other compliance research examinations will improve our efforts to help taxpayers understand and follow the tax law, reduce unnecessary and costly examinations, and reduce burden on taxpayers. Please read the enclosed Notice 1332, Why Your Returnis Being Examined

What You Need To Do:

Please call me on or before February 8, 2010. Ican be contacted from 7:00am - 3:30ptn at the contact telephone numberprovided above.

What We Will Discuss

During our telephone conversation, we will discuss:

• Items on your return that I will be examining

• Types of documentation I will ask you to provide

• The examination process

• Any concerns or questions you may have

• Details of our first meeting - the date, time and agenda

Someone May Represent You

You may have someone represent you during any part of this examination. If you want someone to represent you, please provide me with a completed Form 2848, Power of Attorney and Declaration of Representative, at our first appointment.

This notice was dated Jan. 29, 2010 and they expect response by Feb. 8, 2010.

Is this something new? Is it a "Phone Audit?"

I would appreciate any input from all you experienced preparers.

[chuck]

I've never had a client receive one but it sounds like it might be the random audits that help them establish the computer programs to look into other returns.

[jasdlm]

Is the client an S-Corp?

[JohnH]

I don't think it's a phone audit. It's the same thing as the old TCMP audits, but IRS changed the name a few years ago after some bad publicity. Looks like the purpose of the phone call is to be sure the client (or represenative) knows what to bring to the meeting. It may include marriage license, birth certificates, mortgage papers, etc in addition to the regular documentation for the income & expense items.

[Cathy]

Dear CLIENT NAME:

Your federal income tax return for the year shown above has been selected at random for a compliance research examination.We must examine randomly selected tax returns to better understand tax compliance and improve the fairness of the tax system. If we find any errors during the examination, we will give you the opportunity to explain them. The results of this and other compliance research examinations will improve our efforts to help taxpayers understand and follow the tax law, reduce unnecessary and costly examinations, and reduce burden on taxpayers. Please read the enclosed Notice 1332, Why Your Returnis Being Examined

What You Need To Do:

Please call me on or before February 8, 2010. Ican be contacted from 7:00am - 3:30ptn at the contact telephone numberprovided above.

What We Will Discuss

During our telephone conversation, we will discuss:

• Items on your return that I will be examining

• Types of documentation I will ask you to provide

• The examination process

• Any concerns or questions you may have

• Details of our first meeting - the date, time and agenda

Someone May Represent You

You may have someone represent you during any part of this examination. If you want someone to represent you, please provide me with a completed Form 2848, Power of Attorney and Declaration of Representative, at our first appointment.

This notice was dated Jan. 29, 2010 and they expect response by Feb. 8, 2010.

Is this something new? Is it a "Phone Audit?"

I would appreciate any input from all you experienced preparers.

Jack,

I agree with John. It sounds like possibly a line by line audit conducted to see where IRS needs to focus their attention on further audits.

I'd ask (but might not get) a deferral until after tax season so you can work with client in getting his ducks in a row. Just be very positive, have a good attitude (instruct your client also if he goes with you) and make sure you bring in very, very organized receipts, etc..

The auditers are humans just like us with a job to do. If you make their job easier with organized data they will love you...and your client too! Just think how you feel when those unorganized clients come in...the ones you want to spit on...in March and April, especially!

Cathy

[Jack from Ohio]

Is the client an S-Corp?

Client is an individual. Nothing unusual on the return. Client has been a sole proprietor for several years showing some profit each year till 2008 where her business (due to lower sales and commissions) showed a legitimate loss of $4K. (We do her business bookkeeping)

My gut feels like this is a new way of starting audit. I will post what I find when I talk to the representative.

Any other thoughts?

[OldJack]

I agree with JohnH that this appears to be the same as the old TCMP audits. Expect a complete audit on everything. I have never seen this type of notice where the auditor will tell what is needed by telephone rather than by the letter.

[joanmcq]

I have received these. They are the same as the TCMP audits; a line by line examination of all income & expenses. I think the letter is vague and the initial IDR will be by phone since this is so specific to each return. If not represented, or if the tp is represented by someone who isn't that familiar with audits, going over the necessary docs line by line speeds up the process. And the audit is completely random, nothing on the return caused it to be flagged.

[elfling]

Just went through one of these last month. Client received that letter in December. Called Mr. Healy, the auditor listed, who told him exactly what lines on Schedule C were to be reveiwed and what to gather for those lines.

At the 'sit down' meeting on Jan 7, both the client and I were well prepared for all questions. Mr. Healy did not deviate from the lines he asked us to prepare for, although I am sure he could have had there been any oddities. We were done with everythin in just over 3 hours. Report arrived 3 days later with all clear.

Mr. Healy did answer our client's question of "why" his return was chosen for review. The reply is that our region of PA has not been "looked at" in more than 10 years and IRS will begin randomly reviewing returns here, primarily those containing Sch C. He said it would not be surprising for he and I (as rep for other clients) to meet across the table a few more times within the next year or two.

Joy, joy!

[kcjenkins]

Something to look forward to, huh? Oh well, at least you started off with a good one, so he will tend to think well of you when a harder one comes along. First impression was good, and that's always a plus. The bad thing, tho, is that they are not likely to agree to putting any of them off until after 4/15, because they have pressure on them to close these as fast as possible.

[Jack from Ohio]

UPDATE: Audit is a total line by line audit. Since we did their bookkeeping, no problems with the numbers for the business and we do have the records in our office. Taxpayer has all the other records available as well. However...

The auditor is INSISTING on visiting the taxpayer's home to "see" the inventory for the business. This will create a problem because the auditor wants to schedule the visit during business hours and this will require taxpayer to take time off from work. Additionally, we do not want the auditor to be in her house, or be there with the client to prevent the client from "talking" while she is there.

One other important factor. Our firm is located in Ohio. Our client and the auditor are located in Florida. The auditor strictly refused to have the audit moved. The preparer is an E.A. and we are not sure if she can refuse to move the audit or not.

Any experiences or suggestions would be greatly appreciated.

[kcjenkins]

It's highly unlikely that they will move a compliance audit. Seems your choices are to go there, at client's cost, of course, or engage someone else to meet with the auditor that day. Have the client 'out on business' if at all possible, for all but the first half hour of the audit. That way, if you inform the auditor, he has time to ask enough personal questions to satisfy himself that the tp is not hiding from him, but not enough time to do any real digging, for that he'll have to deal with the professional. A compliance audit is more detailed than a normal audit, so insisting that they deal ONLY with the tax professional will not work, IME.

[taxman11]

can you will you tell me ho your exam went. I have a client put under this program. I thought it ceased in 2005. Here we are in 2010.

Is there still a random selection program going on?

Dear CLIENT NAME:

Your federal income tax return for the year shown above has been selected at random for a compliance research examination.We must examine randomly selected tax returns to better understand tax compliance and improve the fairness of the tax system. If we find any errors during the examination, we will give you the opportunity to explain them. The results of this and other compliance research examinations will improve our efforts to help taxpayers understand and follow the tax law, reduce unnecessary and costly examinations, and reduce burden on taxpayers. Please read the enclosed Notice 1332, Why Your Returnis Being Examined

What You Need To Do:

Please call me on or before February 8, 2010. Ican be contacted from 7:00am - 3:30ptn at the contact telephone numberprovided above.

What We Will Discuss

During our telephone conversation, we will discuss:

• Items on your return that I will be examining

• Types of documentation I will ask you to provide

• The examination process

• Any concerns or questions you may have

• Details of our first meeting - the date, time and agenda

Someone May Represent You

You may have someone represent you during any part of this examination. If you want someone to represent you, please provide me with a completed Form 2848, Power of Attorney and Declaration of Representative, at our first appointment.

This notice was dated Jan. 29, 2010 and they expect response by Feb. 8, 2010.

Is this something new? Is it a "Phone Audit?"

I would appreciate any input from all you experienced preparers.