FISCHER, CARRILLO & ASSOCIATES

$800k Case

IRS CHEATS, FCA BEATS

Represented by: Guy Fischer of Fischer, Carrillo & Associates

The Internal Revenue Service fraudulently denied $30K in deductions to small business owners in a recent $800K audit hearings, forcing greater tax liability upon the company without just cause.

Fischer, Carrillo & Associates, a local tax firm, represented this client in audit hearings, reducing taxable income for the business by determining greater deductions than initially reported. The IRS agent assigned to the case allowed all deductions substantiated by Mr. Fischer, in turn allowing the client to obtain an additional refund. As a result, the IRS assigned supervisor Faith Priest to the case.

The supervisor observed significant financial losses to the IRS, and retaliated in an attempt to recover those losses by denying legitimate deductible business expenses for reported W-2 employee wages, wage tax and sales tax. During audit hearings, Mr. Fischer pointed out that IRS Code (Rev. Rule 80-164) clearly outlines that business deductions for employee wages, wage taxes and sales tax are completely valid and applicable deductions. The IRS denied not only the deductions, but also the source documents, which included receipts, cancelled checks and other substantiating forms. These originating documents validated the deductible business in a concrete manner. The IRS did not recant. The IRS is violating its own regulations.

Since the installment of Mark W. Everson as IRS commissioner, the IRS aggressively increased emphasis on code enforcement through audits. “This enforcement focus has lead to more contentious audits, causing the IRS to step out of bounds in an attempt to gain extra money at all costs,” states Mr. Fischer. “Small business owners in Davis should anticipate the IRS to increase the number of small business audits by more than 50 percent this year.” Personal audits will increase to 1 of every 107 filers for 2006.

Fischer, Carrillo & Associates has filed appeals for the remaining $30K denied by the IRS as well as a formal complaint regarding the supervisor’s actions. It is now reported that the supervisor has been relocated to a smaller division with less oversight in a different city. Mr. Fischer anticipates a complete inclusion of these business expenses in deductions for client’s tax returns, resulting in an additional refund in the client’s favor.

--- UPDATE---
The ruling has come down from appeals and as projected, Mr. Fischer was victorious for his clients. The client was awarded all expenses as originally claimed as well as additional expenses not originally reported. The client will be obtaining an additional refund shortly.