MDNews - Cleveland-Akron-Canton

+++++++++++++++++++++++++ + +++ + BuSINESS SECTIoN +++ +++++++++++++++++++++++++ What to ExpEct if thE iRS Audits Your Medical Practice by martha S. bethea, Cpa T HE IRS IS focusing on audits of cash-basis businesses. This includes most medical practices. What should you expect if you receive an IRS audit notice? The IRS may conduct a correspondence audit, in which they request that you provide substantiation of specific income or expense items on your return. An office audit requests that you or your representative bring specific documents to the local IRS audit. A field audit will be conducted at your place of business, or at the office of your designated representative. A Taxpayer Compliance Measurement Program (TCMP) audit is used by the IRS to update the scoring program used to determine whether to audit tax returns. The TCMP audit looks at every part of your return and is a time-consuming audit. 30 | Cleveland/Akron/Canton MD News If you receive a notice of IRS audit, your first step should be to contact your professional tax preparer to assist you with the audit process. They will have you sign a Power of Attorney authorizing them to represent your practice during the audit. The IRS auditor will provide a list of documents they want to review. They will also set up a time to come to your place of business to interview you and management employees. Your representative should be present during this meeting. The IRS auditor will tour your business and ask you questions concerning your business operations. Answer any questions honestly, but briefly. Be cooperative and courteous to agents; they are only doing their job. Once the location tour/interview is complete, your representative should move the audit to their business location. Prior to this time, all information requested by the agent should have been gathered and reviewed by your representative. Provide only the records requested by the agent. The agent should never be given a document unless a copy is retained by you or the representative. ■ MDNEWS.COM ■ JULY-AUGUST 2013 For a medical practice the auditor will normally take steps to verify the revenue reported on the tax return. Deposits reported on bank statements for the audit period will be totaled and compared to the revenue on your tax return. Your representative can assist the auditor in identifying any items that may be deposited into the bank but not reflected as income such as loan proceeds, capital contributions or stock purchase, transfers from savings or investment accounts. In addition, the auditor will then total payments posted to your practice management system and compare that amount to the revenue on your tax return. Accurate record keeping and monthly internal reconciliations are recommended. The auditor will identify what expense items they want to review in detail. Payroll and other substantial expenses will generally be their focus. The audit generally will not close for a period of six to nine months. The IRS auditor will be handling numerous audits at the same time. In addition, once they complete their process, the file and findings will be reviewed by their supervisor. Finally, expect some findings. Tax laws are not black and white, and the IRS auditor may take a different tax position than your tax preparer. Your representative will consider the tax cost compared to the cost to argue a finding, and they won't spend dollars chasing tax pennies. Martha Bethea is a CPA and the Managing Director in charge of the Medical Practice Management Group of CBIZ/MHM LLC in Akron, OH. ■

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