TCMP Audits
The Internal Revenue Service has a special program to audit the taxpayer's compliance with the various rules and regulations. The IRS has indicated that it will specially examine 153,000 income tax returns between October 1, 1995 and April 1, 1998 in its Taxpayer Compliance Measurement Program ("TCMP").
The IRS has indicated that the results of these examinations will be combined and tabulated and the statistics derived therefrom will be used to assist the IRS in administering the tax laws over the next ten years. The last major TCMP was completed in the late 1980's.
TCMP Audit of a return:
It should be noted that in addition to gathering taxpayer compliance statistics, the IRS will actually be "auditing" your income tax return as well. If it finds deficiencies, it will bill you for additional taxes, interest and penalties. If it finds you have overpaid your taxes, it will issue a refund to you for the amount of the overpayment. This TCMP audit includes a very detailed examination of each and every item reflected on your income tax return.
Such examination may include all of the following (plus more):• a review of the validity of your marriage, if applicable• birth certificates of all your children• a personal balance sheet• an examination of each of your bank accounts, looking at and tracing each of the transactions reflected on your bank statements for the entire year• bank deposits - you will have to show where each deposit is reflected on your income tax return or, if not so reported, why not?• items reflected as deductions on your return will be traced back to your cancelled checks, your bank or brokerage statements. In addition, each receipt for these expenditures will be examined. Every information report issued in your social security number will be traced to your tax return, exceptions must be explained or the omitted item will cause an income tax deficiency
The matching of economic reality with your return.
After this very detailed look at your financial situation, the IRS auditor has been instructed to determine whether the economics reflected on the income tax return match the "economic reality" of your life style. The auditor will look at the expenditures you are making to maintain your life style to see if such expenditures are within the income levels reflected on your income tax return. This part of the examination more than any other part will be very intrusive and will present a picture of the IRS "at its worst."
How to proceed:
Once a taxpayers return has been selected for a TCMP audit, the taxpayer cannot avoid it. The taxpayer must cooperate fully to allow the audit to be completed with the least friction possible. Now, of course, individuals may handle their own examinations. We will be pleased to provide any information we have regarding the details of each item reflected on the return so that taxpayers may combine such information with their data to answer the auditor's questions. Or, if you choose, you may engage us to meet with the auditor to answer the majority of the questions and deal with the minutiae. We will require a valid power of attorney to be executed.
We are here to provide some smoothness and equilibrium to a very difficult and painful process.
The IRS has indicated that the results of these examinations will be combined and tabulated and the statistics derived therefrom will be used to assist the IRS in administering the tax laws over the next ten years. The last major TCMP was completed in the late 1980's.
TCMP Audit of a return:
It should be noted that in addition to gathering taxpayer compliance statistics, the IRS will actually be "auditing" your income tax return as well. If it finds deficiencies, it will bill you for additional taxes, interest and penalties. If it finds you have overpaid your taxes, it will issue a refund to you for the amount of the overpayment. This TCMP audit includes a very detailed examination of each and every item reflected on your income tax return.
Such examination may include all of the following (plus more):• a review of the validity of your marriage, if applicable• birth certificates of all your children• a personal balance sheet• an examination of each of your bank accounts, looking at and tracing each of the transactions reflected on your bank statements for the entire year• bank deposits - you will have to show where each deposit is reflected on your income tax return or, if not so reported, why not?• items reflected as deductions on your return will be traced back to your cancelled checks, your bank or brokerage statements. In addition, each receipt for these expenditures will be examined. Every information report issued in your social security number will be traced to your tax return, exceptions must be explained or the omitted item will cause an income tax deficiency
The matching of economic reality with your return.
After this very detailed look at your financial situation, the IRS auditor has been instructed to determine whether the economics reflected on the income tax return match the "economic reality" of your life style. The auditor will look at the expenditures you are making to maintain your life style to see if such expenditures are within the income levels reflected on your income tax return. This part of the examination more than any other part will be very intrusive and will present a picture of the IRS "at its worst."
How to proceed:
Once a taxpayers return has been selected for a TCMP audit, the taxpayer cannot avoid it. The taxpayer must cooperate fully to allow the audit to be completed with the least friction possible. Now, of course, individuals may handle their own examinations. We will be pleased to provide any information we have regarding the details of each item reflected on the return so that taxpayers may combine such information with their data to answer the auditor's questions. Or, if you choose, you may engage us to meet with the auditor to answer the majority of the questions and deal with the minutiae. We will require a valid power of attorney to be executed.
We are here to provide some smoothness and equilibrium to a very difficult and painful process.
There are other tax-cutting strategies in addition to those mentioned here. If you would like assistance in selecting tax-saving strategies that make the most sense in your situation, contact us today!