Navigating an IRS Tax Audit (Course Id 2150)

Taxes - Taxes for Course Id 2150

The possibility of receiving a letter from the IRS requesting documents for a tax audit often produces considerable taxpayer fear. However, an IRS tax audit doesn’t suggest that the IRS has found a significant error or omission on the client’s tax return. Instead, it is only a review and examination of a client’s tax return rather than an indication the IRS has identified the taxpayer as a tax cheat. Navigating an IRS Tax Audit course for CPAs examines the nature of tax audits, the format they may take, and the reasons why any particular tax return might be chosen for audit. It then discusses taxpayer representation before the IRS and the power of attorney needed to engage in client representation.

NASBA QAS - Text - NASBA Registry - IRS Enrolled Agents - 2150

Course Learning Objectives

• Describe the types of tax audits initiated by the IRS and the typical taxpayer issues addressed;
• Recognize how an IRS tax audit is normally conducted and limited by the statute of limitations;
• List the factors that increase the likelihood of an IRS tax audit and strategies to minimize the chance of an IRS tax audit;
• Describe the nature and function of a power of attorney; and
• Identify the acts that may be performed for a client under a power of attorney.

Chapter 1
The Nature of IRS Tax Audits

• List the types of tax audits initiated by the IRS;
• Describe the typical taxpayer issues addressed in a correspondence audit;
• Recognize the types of IRS concerns resulting in taxpayers’ office and field audits;
• Understand the application of the statute of limitations with respect to IRS tax audits; and
• Describe how an IRS tax audit is normally conducted.

Chapter 2
Understanding & Minimizing IRS Tax Audit Risk

• List the factors that increase the likelihood of an IRS tax audit;
• Describe the algorithms that provide indications of the audit potential;
• Recognize guidelines that may help minimize the chance of an IRS tax audit; and
• Understand how digital assets are taxed.

Chapter 3
Representing the Client Before the IRS

• Describe the nature and function of a power of attorney;
• Discuss when a power of attorney is required and when it is not required with respect to matters before the IRS;
• Identify the acts that may be performed for a client under a power of attorney;
• Explain how to complete the necessary IRS form to name a power of attorney and where to file it; and
• Understand how to revoke an existing power of attorney.

Course Learning Objectives

Introduction

Chapter 1 - The Nature of IRS Tax Audits

Chapter Learning Objectives

Introduction

Understanding IRS Tax Audits

No Claim of Wrongdoing

Not All Audits are Alike

Correspondence Audits

Office Audits

Field Audits

Statute of Limitations

Anatomy of a Tax Audit

Tax Audit Best Practices

Summary

Chapter 1 Review Questions

Chapter 2 - Understanding & Minimizing IRS Tax Audit Risk

Chapter Learning Objectives

Introduction

Why the Return was Chosen – It’s the DIF

Audit Probabilities

Who Undergoes Audits

Minimizing Audit Triggers

Avoiding the Appearance of Excess

Avoiding Unreported Income

Ask for an Extension

Cash Businesses

The Gig Economy

Unearned Income

Circumstances That May Trigger Audits

Virtual Currency

Virtual Currency Transactions

Determining the Cost Basis of Virtual Currency

Cost Basis of Purchased Virtual Currency

Cost Basis of Virtual Currency Received for Goods or Services

Cost Basis of Inherited Virtual Currency

Formerly Gifted Inherited Virtual Currency

Cost Basis of Virtual Currency Received as a Gift

Cost Basis of Gifted Property When FMV is Less than Donor’s Adjusted Basis

Cost Basis of Gifted Property When FMV is Equal to or More than Donor’s Adjusted Basis

Requirement for Substantiating Documentation

Cost Basis Summary

Tax Treatment of Virtual Currency Received for Services

Virtual Currency Received as Wages

Virtual Currency Received by an Independent Contractor

Tax Treatment of Virtual Currency Transactions

Exchanged Virtual Currency

Exchange of Virtual Currency for Other Property

Tax Treatment of Charitable Gifts of Virtual Currency

Reporting Virtual Currency Income, Gain or Loss

Capital Gains or Loss Reporting

Ordinary Income Reporting

Good Records Are Key to a Successful Audit

Summary

Chapter 2 Review Questions

Chapter 3 - Representing the Client Before the IRS

Chapter Learning Objectives

Introduction

Client Rights in an IRS Audit

Who is Permitted to Practice before the IRS

Tax Preparers with Limited Practice Rights

Enrolled Actuaries

Enrolled Retirement Plan Agents

Tax Return Preparers

Professionals with Unlimited Practice Rights

Other Representation

Representation Based on Taxpayer Relationship

Who may not Practice before the IRS

Loss of Eligibility

Failing to Meet Renewal Requirements

Power of Attorney

Acts Performed Under a Power of Attorney

Substituting or Delegating Authority

Agent Authorizing IRS to Disclose Returns to Others

When a Power of Attorney is Required

Non-IRS Power of Attorney

Perfecting a Power of Attorney

Processing a Non-IRS Power of Attorney

Common Reasons for IRS Rejection of a Power of Attorney

Signatures and/or Signature Dates Missing

Lack of Specificity as to Authorized Acts

When the Matter isn’t a Tax Matter

Civil Penalties

Filing and Updating a Power of Attorney

Retention/Revocation of Prior Power(s) of Attorney

Revocation of Power of Attorney/Withdrawal of Representative

Preparing IRS Form 2848

Taxpayer Information – Line 1

The Individual Client

Clients Filing 1040 Schedule C

Clients Filing a Joint Return

Corporate, Partnership or Association Clients

IRS Employee Retention Credit Voluntary Disclosure Program

Participant Eligibility

How the Program Works

Participant Requirements

Summary

Chapter 3 Review Questions

Glossary