(08-08-2022 06:08 AM)solohawks Wrote: Audits for everyone that can't afford to fight them
I have tangled with the IRS more than once - - it has always been a roll of the dice, and the outcome usually has little to do with right and wrong and more to do with the energy level (usually low) and potential underhandedness (sadly, not uncommon) of the revenue agent in charge.
Big mouths as most of us are on this forum, it is unlikely that we are going to end up as targets of a Lois Lerner type hit. Maybe some of you are worth that kind of attention, but I suspect that most of us are not.
Much more likely will be your receipt of a form letter raising an issue spawned from a display of unthinking laziness on the part of the IRS. The letter will cite to some claimed discrepancy - - for one example, an obviously absurd difference between your reported income and a 1099 filed in your name, based upon money that clearly represented a pass-through and for which you properly filed you own 1099 in the name of the actual recipient. Yes, they are that stupid.
When you receive that letter, you will promptly write back a very simple and understandable explanation for why the imputed revenue is not taxable income to you. You will not get any kind of meaningful response. You instead will receive a series of letters letting you know that the IRS is still looking into the matter and setting for themselves a new and further extended deadline by which they promise to get you an answer. All the while, penalties and interest on the claimed underpayment will continue to show as accumulating.
Eventually you will decide to take the affirmative and spend an afternoon trying to reach them. This will entail dialing the number on one of the five letters that they sent you, which will connect to an automated receptionist somewhere in Kentucky. You will then be put on perma-hold (the quickest that I ever got a pick up was 45 minutes, and then an appointed call-back time 3 days hence). When you eventually get to speak with a live agent, who will likely be very polite (it's a recorded line, b.t.w.), you will need to spend a good bit of patient effort explaining why the discrepancy is inapplicable. You will then be asked to fax (they don't seem to work via e-mail) lots of duplicative papers that they already have but don't seem to recognize.
Here's the roll-of-the-dice part. If you are lucky, you will receive back weeks later a letter acknowledging that your explanation has been accepted. If you are unlucky, you will receive back a denial revealing that the revenue agent either did not understand your patiently detailed explanation or is purposely refusing to understand. If that happens, you will need to repeat the process. You of course will want to document all of these calls and the time invested.
There will always be the opportunity to give up out of despair and pay the claimed discrepancy. Unless you have a real jerk on the other end of the line, penalties will be waived.
And, unless you've done something wrong (and mistakes do happen), this will mostly just be a severe test of your patience. I've only once needed to enlist the aid of my accountant.
Here is the important part from my own standpoint: this is just anecdotal experience that I am sharing.
THIS IS NOT TAX ADVICE, of which I am not qualified to give. If you are at all nervous about your situation, you absolutely should speak to someone with actual credentials and experience. The IRS has the ability to put a huge hurt on you, and for most part they don't care about what is right. My experience (and it is just mine) is that they mostly just want the easy outcome and are not above putting you through the grinder to achieve that.
With all of these new IRS agents coming on line, they are all going to be expected to do something. If you have a business, it is now more much more likely that you will be subjected to unwanted attention. Hopefully your experience(s) will be no worse than mine.