california tax attorney

Federal Payroll Tax: What the IRS Expects from Business Owners

If you have employees, you are liable for federal payroll taxes. Some taxes are withheld from your employee’s wages, some you must pay yourself. The Internal Revenue Service, or IRS, administers payroll taxes as part of its responsibilities. Remaining in compliance means understanding how and when payroll taxes are calculated, filed, and paid.
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What is the IRS Statute of Limitations for an Audit?

IRS audits operate under a statute of limitations, meaning the IRS is barred from auditing returns after a set period of time. The limitation period typically begins at a particular time in the process and may be extended according to particular circumstances. Why do these limitations exist and how do they apply to various audit situations?
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What is Reasonable Compensation?

One of the recent hot topics with respect to the IRS audits has to do with auditing S corporations[1] (and those taxed like an S, such an LLC) for not paying their employee/owners “reasonable compensation. According to the IRS “S corporations must pay reasonable compensation to a shareholder-employee in return for services that the employee provides to the corporation before non-wage...
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How to Audit-Proof Your Tax Return (almost)

Full disclosure here, the IRS does not reveal the exact criteria that it uses to audit a tax return. However, this closely guarded statistic is not so much of a secret anymore. Not surprisingly, the government uses statistics to analyze tax returns and to determine which taxpayers it selects for IRS audits. Shameless self-promotion alert: I have also written a pretty comprehensive list of the...
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IRS Audits: The Types of Audits - Part Two

Continued from IRS Audits: The Types of Audits - Part One
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IRS Audits: The Types of Audits - Part One

IRS audits, or civil examinations, are conducted based upon the type of taxpayer, the scope of the examination, and the complexity of the tax return. All taxpayers are expected to provide supporting documentation with regard to questionable items. Examinations may be conducted by correspondence, telephone, or through field interview. Business returns are typically examined in an office or field...
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Why the IRS Audits Tax Returns?

The Examination Division of the Internal Revenue Service is responsible for auditing federal tax returns to determine if income, expenses, and credits are reported accurately. Although the IRS accepts most tax returns when filed, there are circumstances that warrant an audit. Within this context, the IRS is motivated to evaluate those areas of a tax return that fail to comply with current...
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How Tax Returns Are Selected For Audit: Explaining DIF Scores and UI DIF Scores

Ever wonder how tax returns are selected for audit? Well, it comes down to two simple numbers which are your DIF Score and your UI DIF Score. According to the IRS, tax returns are selected for audit based on computer scoring. The IRS states in Publication 556 that it uses a computer program called the Discriminant Inventory Function System (DIF). The Discriminant Inventory Function System...
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IRS Examination

Introduction to IRS Examination IRS Examination is often likened unto and often referred to as the IRS audit function. Typically, the IRS accepts most federal tax returns when filed. However, there are circumstances in which the IRS examines, or “audits,” to determine if reported income, expenses, and credits have been reported accurately by the taxpayer. When a taxpayer’s return is selected for...
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Going Solo: How to Represent Yourself in an IRS Audit - Part Two

Continued from Going Solo: How to Represent Yourself in an IRS Audit - Part One
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