Tax Audits of Cash-Based Businesses: Recognizing Red Flags and Specific Examination Techniques

IRS Audit Techniques Guide, Lifestyle Audits, Trade-Specific Examination Guidelines

A live 110-minute CPE webinar with interactive Q&A


Tuesday, December 18, 2018

1:00pm-2:50pm EST, 10:00am-11:50am PST

Early Registration Discount Deadline, Friday, November 30, 2018

or call 1-800-926-7926

This webinar will provide tax advisers and professionals with a practical discussion of responding to and defending IRS audit examinations of closely held cash-intensive businesses. The panel will outline useful strategies for responding to examination notices, detail documentation response requirements, and describe the approaches the IRS generally employs in conducting an audit of a cash-intensive business.

Description

Cash-intensive businesses, the majority of which are closely held, are at heightened risk of audit by the IRS. The Service continues to focus on small businesses that derive significant portions of their revenue through cash payments, and its audit guidelines give examiners a broad range of investigative techniques.

The IRS takes the position that cash-intensive businesses present a greater possibility for income under-reporting due to the relative ease in which cash payments can be diverted. As a result, the Audit Techniques Guide for cash businesses allows auditors to examine proprietors’ personal expenditures to determine whether the reported net business income corresponds with the owner’s lifestyle. Further, the ATG provides “hot topics” for a range of specific cash-based businesses.

CPAs advising individual owners of small, cash-intensive businesses should be aware of the potential IRS audit approaches, as well as strategies and documentation to avoid and respond successfully to tax audits. Techniques such as ratio analyses to show consistency with prior years’ activities and industry averages can be a useful tool in knowing whether a cash-intensive business presents audit red flags. Tax advisers must have this information, but segregate it from information requested by and provided to the IRS.

Listen as our experienced panel of tax professionals provides a practical guide to the process and challenges of IRS audits of cash-intensive businesses.

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Outline

  1. IRS audit focus on cash-intensive closely held businesses
  2. The potential audit “red flags” for owners of closely held cash-intensive businesses
  3. Audit Technique Guide guidelines for using “lifestyle analysis” of owners of cash-intensive businesses to determine possible under-reporting of income
  4. ATG business-specific areas of examination
  5. Strategies to protect against or defend IRS tax audits
    1. Ratio analysis techniques (horizontal and vertical)
    2. Dividends and salary
    3. An internal comparison of owner’s individual and business tax income tax returns to identify any potential red flags

Benefits

The panel will review these and other critical topics:

  • What are audit red flags for owners of cash-intensive businesses?
  • How the IRS may use a “lifestyle” analysis of the owner of a cash-intensive business as a means of determining whether the owner has under-reported income
  • Business-specific guidance listed in the IRS Audit Techniques Guide for examining various types of cash-intensive businesses
  • Using ratio analyses to avoid potential audit red flags, as well as to respond to IRS audit requests
  • Isolating financial data for the period covered by audit request

Faculty

Parent, Anthony
Anthony E. Parent
Founding Partner
Parent & Parent

Mr. Parent is the founding partner of his firm, and has a tremendous amount of success in opt-out audits and FBAR...  |  Read More

Additional faculty
to be announced.

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