Getting Tax Help From the IRS Online

Tax and Financial News

November 1999

Getting Tax Help From the IRS Online

Getting information to help you prepare your taxes or prepare for an audit is now easier than ever with two Internal Revenue Service services. One of the sources is the IRS Web site at www.irs.gov, and the other source is the IRS Superintendent of Documents. The IRS Web site features most of the guides needed by individuals or small business owners, but the Superintendent can provide any guides not easily obtained online.

IRS Online

The Web site for the IRS contains instruction manuals that auditors use to guide them in their work. This useful information helps to level the playing field between the filer and the auditor. Here are some of the specific documents you may want to look up to help you better prepare.

Audit Guides

There are specific audit guides that an IRS auditor uses for a variety of businesses. You may want to get a particular guide for your business if it is available. There are dozens of these auditor guides or Market Segment Specialization Program Audit Technique Guides. Some of the guides available include Artists and Art Galleries, Commercial Banking, Furniture Manufacturing, Retail Liquor Industry, and many more.

Many of the guides focus on businesses that handle a lot of cash. For example, the guide on bed-and-breakfasts lists some of the most common sources of unreported income. The guide reports these sources could be referral fees paid by local restaurants, fees for shuttling guests to nearby tourist attractions, and, of course, tips. These services are usually paid in cash, and the IRS wants to make sure the business owner does not simply pocket the money. An auditor will want to see a record of that income, or he may want to analyze your bank deposits to see if you have unreported income. Most likely, if you show where the numbers appear on your tax return and hand over a list of cash deposits, the auditor will lose interest.

The guides also show the small business owner some insight into what an auditor looks for in determining whether or not you are using your business to pay for and deduct personal expenses. For example, the bed-and-breakfast guide suggests the auditor check out who pays for the family groceries, you, or your business. The good idea is to keep two checkbooks and write two separate checks for personal and business groceries.

Auditors will often focus on bars and restaurants because of the amount of cash they handle. Of particular interest is the markup on food and drinks. The IRS guide says, for example, that a margarita should only cost 57 cents to manufacture, yet, retailers usually charge six to ten times that amount to customers. The auditor may tally up the costs of goods sold and multiply it by your markup and expect that income figure to be the one reported on your tax return. Either be sure these numbers match or be ready with a good explanation of why they do not.

IRS Training Materials and Standards

These guides show the auditors the standards to determine how much a taxpayer can afford to pay when settling an overdue tax bill. They also show auditors guidelines for dealing with businesses that use independent contractors. How the IRS conducts undercover operations is one of many other topics discussed in the IRS manuals online.

Other Useful Information

Some of the other information you can obtain on the IRS Web site includes but is not limited to the following:
· IRS Rulings and Procedures
· Current Interest Rates Used by the IRS.
· Local IRS "Problem Solving Days."
· Special Programs Offered by the IRS.
· Hundreds of Frequently Asked Questions(FAQs) are listed.
· Tax Law Research
· Treasury Regulations
· Personal Answers by Email

The tax law itself or Internal Revenue Code is also available online at the IRS Web site. You can use the Web site to keep better informed or to get or make suggestions. For the most expedient way to view the site, use the "text-only" version, and if you get confused on where to navigate in the site, use the "Site Tree." Whether you are filing yourself or using a professional, the IRS Web site can provide important and useful information.

If you need to obtain an auditor guide for your business that is not listed, or if you need a written copy of a guide or manual, you can call the IRS Superintendent of Documents at (202) 512-1800.

These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.