THE Treasury Inspector General for Tax Administration (TIGTA, an agency that oversees the IRS) instructed the IRS to expand audits to prior and subsequent years. This means that if IRS audits your income tax return for 2013, they must expand the audit to your 2012 and 2014 as well. Ouch!
The Treasury Department conducted its own audit of the IRS to determine whether tax compliance officers conducted required filing checks in accordance with IRS policies and procedures.
TIGTA stated that IRS must make every effort to ensure that audits are expanded to prior year returns, as well as subsequent year returns, when “substantial” taxes may be involved.
TIGTA evaluated single-year audits of individual returns for which the taxpayers involved agreed they understated their tax liabilities by more than $4,400. Auditors scrutinized 100 such sample cases. Although similar tax issues may have existed on prior and/or subsequent year returns, the audits were not expanded to those returns in 48 of the 100 sample cases. As a consequence, opportunities may have been missed to address the noncompliance that contributes to the tax gap and promote tax system fairness among the vast majority of taxpayers who properly report and pay their taxes year in and year out.
IRS has estimated that $197 billion of the $345 billion tax gap is attributable to individuals underreporting their income tax liabilities.
TIGTA identified three factors why the IRS may not have expanded audits:
1. The agency “strives to keep its audit inventories free of old tax year returns.”
2. Tax compliance officers do not seem to be taking full advantage of available internal sources of information when conducting required filing checks.
3. There is inconsistent accountability regarding the quality of filing checks by tax compliance officers.
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Sy Al-os Accountancy Corporation provides accounting and tax services to individuals, corporations, LLCs and business entities. The Firm has a niche in defending taxpayers audited by the IRS and other governmental agencies. The firm celebrates its 38th anniversary in 2015.
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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in 704 Mira Monte Place, Pasadena, CA 91101. He has 50 years of experience in accounting, consulting, and tax work.
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The Firm proudly welcomes Arlene Al-os in 2015. She obtained her bachelors of Science in Accountancy from Mindanao State University and MBA from Ateneo de Manila University. She teaches intermediate accounting at UCLA and was a professor of Economics at Asia Pacific College. She has over 15 years of experience including member firms of KPMG and BDO Seidman accounting firms.
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Our readers may call (626) 744-0200 or email tax questions to [email protected]. Please visit our website for about 300 tax tips at www.victorsycpa.com.
