new audit client next steps

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  • #44065
    STEVEN BUONOMO
    Participant

    I just got my first audit client today and need guidance on my next step(s).

    Client came to me after he was just assessed on 1040 tax for tax years 2017, 2018, 2019.

    The assessment included Form 872 to extend the period for assessment. The form is asking for an extension to 4/15/22. Also included is Form 4549-A Report of Income Tax Examination changes. The total amount due for all 3 years combined is $47,269.

    I am meeting with the client next week. What questions should I be asking?
    1) Do they agree with the assessment?
    2) Should I wait for the 90 day notice or deficiency or reach out to the RA immediately?
    3) Should I ask the client how the audit arose and what kind of documentation do they have for support?
    4) Are my options audit reconsideration or doubt as to liability?
    5) Should I discuss preparing a 433-A and collection alternatives or is it too early in the process?

    Thank you for any guidance.
    Steve

    #44066
    James Wade
    Participant

    Steven,

    It sounds like the audit itself has happened and now the fight it or pay it decision needs to be made. I can’t say exactly what questions to ask but I’d start with looking over the documentation to get a feel for what the IRS is basing its assessment on. Once I have that in mind then I start asking questions about what the client believes happened. Was this a lack of documentation, disagreement as to tax treatment, refusal to cooperate so the IRS just denied the deductions. What did the IRS ask for, what did you say, and what information did you provide. The client will obviously say the IRS were jerks and they gave the IRS everything. Really developing the who, what, when, where and why is everything.

    You probably want to really get comfortable with what happened first and that should help illuminate what you do next. Honestly, as for reaching out to the IRS, never hurts to reach out to the IRS as you never know what will be said. You may find some ability to negotiate the items so some agreed upon solution can be hammered out. Then your clients can focus on how to pay it.

    Eric I think said something about extensions of assessment that he never agrees to them unless the extension can be limited in scope if he thinks the client just needs time to gather documents or other support. Again, a lot depends on the issues in the audit and the client’s ability to refute the IRS assessment.

    Good luck!

    Jim Wade

    #44067
    STEVEN BUONOMO
    Participant

    Great insight James. I really appreciate the suggestions. I am excited to meet and discuss with the client.

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