JULY 2019
In This Issue

We are grateful to have the opportunity to provide you with this valuable information via our monthly e-newsletter and our unparalleled forensic accounting and fraud investigative services.

The goal of this e-newsletter is to provide you critical, inside information that will help you "follow the money" in business disputes, divorce cases, fraud cases, estate matters, corporate embezzlement and to prevail when defending an IRS criminal case. We will do this by sharing the knowledge we have from our 25+ years of experience as an IRS Special Agent and 16 years as a private investigator / forensic accountant.

We take special care to ensure the information we provide you in "The Beacon" is the latest and most current information available.  In this edition, we talk about how to deal with IRS employees.

We want to write about topics that will assist you in prevailing with fraud, divorce, estate and probate, and IRS criminal cases. Please e-mail us your topics of interest to Thebeacon@sageinvestigations.com
We encourage you to share our e-newsletter with others in your sphere of influence.  
Edmond J. Martin
Principal, Chief Investigator
Certified Fraud Examiner (CFE)
Texas Certified Investigator (TCI)
Dealing with Internal Revenue Service Employees  

This is a continuation of "The Importance of Maintaining Proper Records for the IRS." The most current data available from the Internal Revenue Service shows that the IRS audits currently are handled by correspondence audits (74.8% in Calendar year 2017). The remaining 25.2% are handled in the field by Revenue Agents or Tax Compliance Officers. Revenue agents are generally trained for and involved in more complicated individual partnership and corporate returns. Tax Compliance Officers are trained and deal with individual return matters. There were 150,043,277 Individual Income Tax returns filed in 2017, and 6% were audited resulting in 19% handled by the field agent and the Tax Compliance Officers. The Correspondence Audits handled 81% of the audits and recommended additional taxes 49% of the time and the Compliance Officer 51% of the time.

As you can see, the IRS is heavy into Correspondence Audits as a result of information they accumulate in the form of 1099s, W-2, K-1 and other information documents.

Non-filer cases are referred for examination by the Collections Program and the Automated Substitute for Return (ASFR) Program. Under the ASFR Program, the IRS uses information returns from third parties (such as Forms W-2 and 1099) to identify tax return delinquencies, and constructs tax returns for certain non-filers based on that third-party information, and assesses tax, interest, and penalties based on the substitute returns.

Case Study

The Tax Compliance Officer (agent auditor) conducts an audit of a tax return containing a Schedule C with income and expenses. After a review of the taxpayer's records the agent auditor issues a report, commonly referred to as a "30-day letter" with a response "due date." The report will show adjustments to the return and a tax liability with penalties and interest. It is very important to pay attention to the "due date" and the instructions in Publication 3498 and those below.

30-Day Letter - Choices available
  1. If you agree with the proposed changes in the report, sign, date and return a copy of the report by the due date. If a joint return, both spouses must sign the report. If you owe additional tax include payment in full to further limit penalties and interest charges.
  2. If you agree, but cannot pay the full amount you owe, sign, date and return a copy of the report by the due date and contact the IRS to discuss payment arrangements.
  3. If you do not agree with the proposed changes in the report, contact the agent and request a meeting or a telephone conference with the supervisor. If you still don't agree after the meeting or telephone conference you can request a conference with the Office of Appeals, but you must still submit a small case request or formal protest by the response due date.
  4. If you do not reply by the response due date the case based on the proposed changes will be processed and a notice of deficiency will be sent to you. You will have 90 days to agree or to file a petition with the US Tax Court. The case will go back to the IRS attorneys for an attempt at a pretrial settlement. If no settlement is made, the case will be heard in court. If you do not file a petition during the 90-day period after receiving the notice of deficiency, the amount of the notice will be assessed and the full amount will be required to be paid or arrangements for payments will have to be made.
Caution: Do not allow
...  Read More  

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At Sage Investigations we are dedicated to serving our clients nationally, to help them navigate the difficulties of dealing with fraud, divorce, estate and probate, the IRS Criminal Investigation, and other complex (forensic) financial fraud investigations. By narrowing our focus to our primary strength of following the money, we steer our knowledge, efforts, and experience to financial issues. We help our clients propel their cases forward by assisting in the review, acquisition, and organization of financial records, evaluating the elements of their cases, and helping create winning strategies. Through the use of our proprietary advanced financial investigative technology we trace and analyze complex financial data quickly, easily and efficiently, saving our client's time and money.
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