I recently represented a member in an audit with a conflict of interest. The audit was focused on her husband’s Schedule C business, and our member informed me that the two had separated since filing the return in question. She went on to explain that her spouse had already moved forward with separate representation. So, my involvement was limited to keeping my member up to date on the process and answering questions as they arose.
Shortly after taking on the case, I received a phone call from the Revenue Agent, who explained that the report had gone out and that our member’s spouse had already signed and returned his copy. Our member later called and confirmed that a conclusion had been reached and that she, too, was ready to sign. I told her that I needed to review the report for errors first and would get back to her as soon as possible.
Using the documents supplied by our member, I completed a proforma. At TaxAudit, a proforma is a re-creation of the taxpayer’s filed return, with the changes that the taxing agency incorporated. This recreation aids us in accurately interpreting the impact the proposed changes will have on the member’s return, and in further verifying the taxing agency’s proposed changes. This also helps to determine best and worst-case scenarios.
The proforma revealed the report contained a common error with self-employment tax. The taxpayers were being overcharged by more than $7,000 in tax, penalties, and interest. Our member was very appreciative and asked me to get it corrected. I contacted the Revenue Agent, who immediately issued a new report.
I was very limited in what I could do for this member. Since her soon to be ex-spouse was the primary taxpayer and had obtained separate representation, I had minimal access to documents and could not verify any of the adjustments. However, by following the procedures we learn here at TaxAudit, I was still able to improve the outcome for both my member and her spouse as well. That is the very reason that we exist – to help people. We do what we can for our members no matter the circumstances, and a conflict of interest does not deter us from this.