HR is a single real estate professional that buys, fixes up, rents and sells properties. HR received several IRS letters on the examination of his tax return. HR never responded as was being assessed over $90,000 in additional income taxes. Furthermore, the IRS expanded its audit to the last 3 tax years. HR also failed to file corporate tax returns for a Company formed receiving commissions on real estate sales.
HR’s tax return was prepared inexpensively by a person moonlighting as a tax preparer. There were numerous deductions that could have been taken that were not. There were certain tax beneficial elections available to real estate professionals that would have significantly reduced his income taxes that were not filed timely. There were ridiculous deduction amounts reported for automobile expenses, travel, meals and entertainment – high exposure areas to a taxpayer in tax examinations.
We were able to get additional time from the IRS to reconstruct records and prepare both individual and corporate tax returns. This additional time also allowed us to have the very first year of examination (the one with the highest exposure) excluded from examination. We reconstructed all records and tax returns resulting in eliminating all taxes assessed and preserving a loss carryover which eliminated all income taxes that would have been owed for succeeding tax years. Taxpayer received a refund check of around $25,000, paid no taxes in the following year and is able to exclude around $50,000 in income that would be otherwise taxable thereafter. Total professional fees to the taxpayer were around $18,000.