A father and son who own several bars in Michigan learned a hard lesson in an IRS audit recently.  The men were contacted by the IRS regarding an audit.  The IRS was questioning income for the past few years and requested all business records and Point Of Sale (POS) records.  The son contacted the company’s POS vendor requesting specific instructions on how to delete all records of their POS receipts.  The vendor walked him through the process.  The son called back several months later requesting the same help.

During that conversation, the son stated their “goal was that no one would be able to retrieve anything from the computers or the POS administrator.”  They even cleared the recycle bin on all company computers.  They met with the IRS auditor that same day.

Ultimately, the IRS has tremendous power and was able to compel the POS vendor to provide any and all information regarding their interactions with the company.  This brought the actions of the bar owners to light, resulting in obstruction of audit charges and “structuring” regarding repeated deposits under $10,000 in order to evade standardized reporting.

In a plea agreement, the pair admitted that $232,000 was not reported on business tax returns in 2013, and $176,000 was not reported in 2014.  The IRS audit says the father and son owe $126,703 in restitution, according to the plea agreement.

Obstructing the audit carries a potential prison term of three years followed by one year on supervised release. A conviction could result in the suspension or loss of a liquor license, the government said.

This story is unfortunately not unusual, and San Diego businesses should take note of the Michigan bar owner’s hard lesson in an IRS audit and the power of the IRS.

Never underestimate the power of the IRS or their desire to gain additional revenue at your expense.  There is a reason they have targeted you for an audit, and they have a plan to extract money from your accounts.

Allen Barron and our skilled IRS tax attorneys protect clients from the IRS during an audit.  The strong legal protections of the attorney-client privilege combined with our extensive knowledge of US tax laws and Generally Accepted Accounting Principles (GAAP) allow us to challenge IRS auditors when necessary and prevent “audit creep.”  Learn why you should never contact the IRS directly and download our free guide: What to Expect from an IRS Audit.  We invite you to call for a free consult at 866-631-3470.

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