If you are the owner of a business and have received any form of contact from the IRS you should view it as a red flag, and carefully read the letter they’ve sent. Many people think “Oh, they’ve slightly modified something, no big deal” until they start receiving adjustments going back years and demands for payment. The next knock on the door is a California tax agency looking to get in on the action.
This office has witnessed some very peculiar behavior out of the IRS and California tax agencies as they strive to increase tax revenues. We have battled the IRS on behalf of several clients over seemingly minor adjustments that make little sense, only to find out they’ve made an arbitrary entry somewhere else, or are adding penalties and interest where none should be applied. In many cases they are going back years (2005 for a recent client), attempting to fabricate tax liability where often none exists.
It is even more concerning that a growing number of the IRS’ representatives we’ve encountered are not extensively trained in accounting, and often we must help them to understand the nuances and resulting differences between standard accrual accounting and cash accounting.
Business owners and US taxpayers are usually prudently cautious whenever the letters I-R-S are involved, but now more than ever it is important to pay attention to any issue raised by a tax agency. If you don’t easily and throroughly understand the substance of the communication you’ve received we invite you to call us at 866-631-3470 for a free initial consultation. These are no longer black and white issues of numbers and accounting. It’s a strategic battle to prevent arbitrary creation of tax liability where none exists.
