Local Affordable Tax Audit Specialists + We are an Affordable South Florida team of IRS Tax Audit Experts, former IRS agents and managers, since 1982.
We know the IRS system inside and out.
Not only were we former IRS agents we were teaching instructors and supervisors within the IRS Audit system.
We were former teaching instructors with the Internal Revenue Service.
We worked b0th in Audit and collection divisions. Since 1982, we have been representing people in the South Florida, Fort Lauderdale and Miami area.
You want to hire IRS agents because of their knowledge of the working system of Internal Revenue Service.
There a lot of methodologies to working IRS cases enter volume of experiences can collaborate into the very best tax result possible.
Many profess to be Experts in the area of IRS tax Audits but unless you have handled thousands of cases and been involved in the system on a daily basis you do not know the complete working system of Internal Revenue Service.
When you are involved in an IRS tax Audit you also want to be able to fix the problem so IRS does not come after you in the future. We can help Audit proof your tax return.
When you call for your initial tax consultation we will fully review the scope of your case give you an expert opinion on the likelihood of settlement in different options.
What are the chances of an IRS Audit? Less that one percent, that’s it.
If you got an Audit letter, you are very unlucky.
And the chances are, there’s a very specific reason why you got in IRS Audit letter.
At Michael D. Sullivan, Former IRS Agent LLC you will be represented by a CPA or former IRS agent who knows the system and can provide your very best tax Audit defense.
If we cannot settle your case at the local office will take your case to the Appellate Division or settlement s and the best deals are usually made.
We know this from our years of IRS experience.
It only makes sense to have Former IRS Agents and IRS Tax Audit Managers handle your IRS tax Audit and give you the most experienced and successful expert IRS Tax Audit help.
We can also tell you how to help Audit proof your return in the future.
IRS Audits are very predictable and after reviewing thousands of tax returns over the years we can tell you which cases are going to be subject for IRS tax Audits.
Facts about IRS Tax Audits: Lucky us
• The IRS Audits a total of 1,391,581 tax returns a year. This number goes up or down depending on the IRS budgets for tax Audits.
• The IRS field agents complete more that 310,000 Audits by office or business visits a year,
• The IRS completes over 1,081,152 correspondence Audits a year. IRS collects a little over $5 million a year from his correspondence Audits,
• IRS has installed new software tracking systems with the development of the CADE 2 computer to spot and recognize tax Audits more proficiently,
• IRS employs over 13,000 IRS Auditors.
• $5.2 billion dollars are collected through the IRS document matching program. These programs are W-2 and 1099 oriented.
• For truly professional IRS Tax Audit help contact former IRS Agents and Managers.
The Secret Formula: How The IRS Picks Audits
The IRS uses a quantitative method called discriminate Analysis to identify the ‘underreporters’ from the normal returns, driven largely by the following details.
• Schedule A Ratio: They’ll Audit you if your schedule A (Itemized) deductions are more that 44% of your income.
• Schedule C Ratio: They’ll Audit you if your ratio of schedule C (Business) deductions is more that 63% of income.
• Schedule F Ratio: They’ll Audit you if your ratio of schedule F (Farm) deductions is more that 67% of income.
• Audits are 4x more likely if you own a business and 2x if you own a farm.
• The Obama administration has focused on high earners:
◦ Audits 5x more likely if your income is above $100,000.
◦ 20% chance of Audit if you make $10+ million. (20x the average Audit rate)
◦ 12% chance of Audit if you make $5-10 million. (12x the average Audit rate)
• Occupation affects your Audit likelihood
◦ 22% of business and personal services companies are Audited every year.
◦ 16% of building contrainstructors are Audited every year.
The IRS Tax Audit Examination Plan:
What you Need to Know about the IRS
The IRS Audit plan that is used by the IRS is based on long-range coverage planning, and objectives on the resources requested in the Congressional Budget.
From this, there is an established plan where staff years are allocated to all area IRS offices using resource allocation and a prescribed methodology.
Each Area Manager of the IRS is responsible for preparing an area response following instructors from the National Headquarters.
Why the IRS Audits Tax Returns
IRS Tax Audits : Although there are a variety of reasons listed below some are the most common.
a. Front Loaded Programs
Front Loaded programs are those tax Audits that IRS DC headquarters has determined are very important and a considerable amount of time must be spent on these programs and activities. Each area has discussions within management as to what the programs should be for each region, district, and office.
Some of the programs are:
• Special enforcement programs – An example of this may be compliance of all flee market vendors, a program I was involved with
• High Income non-filers – The IRS would get their information from a match program of w-2’s and 1099’s and match up social security numbers against filed returns
• Abusive Tax Avoidance – This could be in the area of offshore activities
• Offshore credit card program
• National Research programs – Those set forth by management after doing a trends project
• FBAR filing – IRS is currently targeting those with overseas bank accounts
• Non- filers – IRS is presently forming a task force to seek non-filers though aggressive means.
b. The IRS makes sure there is balanced coverage.
The National Office makes sure there is a balanced approach for Audit return delivery and tax compliance. Resources and inventory and the size of personnel all go into this formula.
IRS focuses are blended into these areas:
1. individual returns less that $100,000.
2. individual returns greater that $100,000 but less that $200,000.
3. individual returns greater that $ 200,000.
4. Small Business Corporations.
5. Small Business Flow-Through Entities – S Corporations, Fiduciaries and Partnerships.
c. Classification Plan
The IRS will prepare a plan, which is classified. A National DIF score indicator is placed on all Federal Income tax returns that are filed.
Each tax return has certain instructors that contribute to its score such as Gross Income, Adjusted Gross Income and line item expense.
There are several classified secrets that go into the DIF score.
Each tax return is processed through the IRS computer line item by line item.
A DIF score label is placed on every tax return with its DIF number.
A tax examiner or Revenue Agent manually eyeballs each and every tax return with a high DIF score.
The examiner then determine which return has the highest probability of tax Audit success.
d. DIF Cutoff Score, this is the most common reason for Audit. each and every tax return has a DIF score, this stands for discriminatory index function.
The IRS will calculate the Area DIF cutoff score for each activity code, giving consideration to the selection rate.
This is the lowest DIF score necessary to secure the number of returns required for Audit. for example, if the return plan shows 225 returns for an activity code and the selection rate is 70%, the IRS will need to order 321 returns (225/70%).
The DIF Cut off Score is 500. The number of returns with DIF scores greater that 550 is 280, which is less that the number of returns required, so the lowest DIF score on an ordered return will be in the range of 500 to 550 and the DIF cutoff score is 500.
All tax returns are graded by the Internal Revenue Service. That’s right, each and every tax return has a DIF score.
There is a label placed on the back of every tax return that grades Audit potential.
Much of the Audit numbers are predicated on the budget that Congress gives to the IRS.
Over the last couple years the number of Audits are going down by small percentages simply because they do not have working staff to handle all the IRS Audits that are truly needed. It is not wise to play the Audit lottery.
Call us today for a free initial tax consultation and we will review your tax returns, go over best case scenarios and talk about your IRS tax defense for an IRS Audit.