IRS Examination Representation

CASE STUDY DETAILS

IRS Examination Representation – Turning a $300,000 Tax Bill Into a $300 Refund

A business owner from Northern Idaho operating a factory with disorganized records.

The Problem:
A few years ago, we was retained by a client who found themselves in the crosshairs of an IRS audit. The IRS had flagged their tax filings, which were based on handwritten notes and incomplete documentation. With little to substantiate the claimed deductions and income, the IRS initially assessed the client with a $300,000 tax liability.

The IRS auditor, based in Spokane, WA, requested full proof of income, expenses, and business operations—a task that seemed insurmountable given the disorganized state of the client's records. Without professional assistance, the client faced a potentially catastrophic financial outcome.

Small Business Owner

Personal & Business Tax Debt/Liability

Boise, ID

Our Solution:

Reconstructing the Records:

The first step was to recreate the client’s financial records from scratch.

Using bank statements, receipts, vendor invoices, and any available documentation, we pieced together accurate financial statements that represented the true operations of the business.

This effort required meticulous organization and attention to detail, as we needed to match every claim on the tax return with supporting evidence.

IRS Audit Representation:

I took the lead in communicating with the IRS auditor, maintaining regular and professional conversations to understand their specific concerns and provide clarity on the client’s business operations.

I ensured the auditor had all the necessary documentation to evaluate the case fairly, presenting the reconstructed records in a clear and organized manner.

Correcting the Tax Return:

With the reconstructed records, we amended the client’s tax return to reflect accurate income and expenses.

The revised filing eliminated discrepancies and demonstrated that the client had overpaid taxes rather than underpaid.

The Outcome:
After months of detailed work and coordination with the IRS, we successfully resolved the audit. Instead of the $300,000 liability, the client received a refund of $300.

The audit was officially closed, and the client was overjoyed with the outcome. This resolution not only saved them from financial ruin but also gave them peace of mind moving forward

Why It Matters:

This case highlights the importance of accurate recordkeeping and professional representation during an IRS audit. By recreating the client’s financial records and maintaining open communication with the IRS, we were able to turn a dire situation into a positive outcome.

Before closing the case, I advised the client to implement a proper bookkeeping system to ensure they wouldn’t face similar issues in the future. Keeping organized records and working with a qualified professional can prevent costly mistakes and audits down the road.

In the end, this case demonstrated that with persistence, organization, and expertise, even the most daunting IRS assessments can be resolved successfully.

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IRS Examination Representation

CASE STUDY DETAILS