Legal Question in Tax Law in Georgia

A few months ago, I received a notice from the IRS that they were auditing my 2012 particular they were inquiring about business expenses taken on Schedule C. I wasn't to alarmed by the audit because I am a real estate agent/small business and more importantly I could substantiate all deductions.

Upon receiving the notification, I contacted my neighbor who is a CPA. He agreed to help me with the audit for a fee. He had not "officially" prepared my taxes but had often answered questions and reviewed them for me for a nominal charge.

I informed the auditor via telephone that I had enlisted the services of a CPA who would be handling the audit for me henceforth. She was clearly pissed and informed me there was no reason to involve a CPA.

Subsequently, I received a notice from the auditor that she had filed a subpoena to obtain my 2011 and 2012 bank statements from BOA as well as investment statements from TDA. The CPA call to ask her why she had subpoena the records: a) the letter stated she was auditing 2012 only; b) the letter specifically asked for documents supporting the expenses pertaining to Schedule C which were provided to her; and c) among the documentation provided to the auditor was the 1099 from my real estate broker and the 1099-B from my investment broker. She responded "just in case she needed them".

In any case, I provided him with the requested documents in the initial letter from the auditor. He forwarded the documents along with a completed Form 2848. A few days later, he and I both received an acknowledgement from the IRS regarding receipt of the POA form and the requested documentation.

Several weeks went by, neither my CPA nor I received any further communication from the IRS auditor. My CPA contacted the auditor last week and was informed she had finalized/submitted her audit of 2011, 2012 and 2013 taxes.

She provided a copy of the final audit. That was two weeks ago.... I have yet to receive any communication from the auditor or a copy of the audit report.

Upon review of the copy provided to my CPA, the auditor had eliminated a few nit picky deductions on Schedule C but also denied other deductions such as disallowing all medical expenses, partial child care deductions and interest on raw land on which I allow people to store equipment for a fee.

The reason stated for EVERY denied deduction was: "No documentation was forthcoming from the taxpayer ". However, neither I nor my CPA were EVER ASKED to provide verification of medical or child care expenses. An interest statement was provided for the land along with the other documentation requested for schedule C.

Of course the NET result of the audit is that IRS ,,,, I owe taxes plus P&I for 2011, 2012 and 2013.

My CPA is telling me not to worry. He says he is going to appeal the audit. He insists the auditor cannot arbitrarily audit 3 years without proper cause or notice when the initial audit notice was for one year. In addition, he insists I cannot be denied legitimate and documentable deductions..

BUT the fact is ... I am worried because clearly the IRS doesn't give a hoot about their own protocol let alone the rights of taxpayers. WORST... because of this bogus audit, I'm anticipating not receiving the much needed over payment I'm due for 2014.

In spite of the confidence I have in my neighbor/CPA, i think any one who trust the IRS to do the right thing is a fool's fool.

So at this point, I feel it is in my best interest to hire a HELL of a TAX attorney to straighten out this God-forsaken mess!!

Please advise...

Asked on 3/12/15, 2:38 pm

1 Answer from Attorneys

Scott Riddle Law Office of Scott B. Riddle, LLC

You answered your own question (had you actually asked it). Get a good tax attorney.

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Answered on 3/12/15, 2:43 pm

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