It happened — We handled it
Case Histories
Turning Tax Disaters into favorable outcomes
The following are some real-life examples of how the team at Duffy Financial Services has used their expertise to help their clients when they needed it most.
Case History #1
IRS Audit Amount Reduced 75%
A woman with four young daughters was getting divorced and hired Duffy Financial Services to prepare her tax returns. Her ex-husband was a real estate agent with many sources of income besides his salary and no expenses. Two years later, she received a letter from the IRS looking for $10,000, which subsequently developed into an audit.
The woman returned to Duffy Financial Services looking for help. She explained that her mother had passed away leaving an inheritance, and she was able to provide the accounting record for her mother’s estate.
Our accountant represented her at the IRS audit. Upon asking the auditor why our client had been pulled for an audit, the IRS agent responded that the ex-husband’s income was undeclared and that the interest income had gone up a significant amount. The agent believed the ex-husband to be hiding money. We knew the interest income for the household had increased due to her mother’s inheritance. Well prepared, we provided the accounting record for the mother’s estate.
The original $10,000 the IRS was looking for was reduced to $2,500. Through effective communication and meticulous preparation we were able to solve the problem quickly and effectively to our client’s advantage.
Case History #2
The Art of a Succesful Audit
Our client was self-employed and very productive; his annual revenue was over $500k. Because he serviced the entire Northeast in his business, the accountant at Duffy Financial Services validly took business miles in excess of $50k in 1 year. This client would also buy his clients tickets to professional sports events, concerts, and other live entertainment events. His entertainment expense numbers were also very high, around $80k-$90k.
This client got selected for audit. Usually the accountants at Duffy Financial Services do not permit the client to attend the audit due to the stressful nature of the event. In this case, we made an exception because the client requested to attend. As is customary audit proceedings, our accountant asked the client to let him lead and not say anything until indicated to say something; the client agreed.
Together, we met the IRS agent and started making small talk. Our client had just finished running the Boston marathon for charity. It just so happened that the IRS agent’s child had received a benefit from that same charity years before. The client and IRS agent got along famously. So we changed our course of action, allowing our client to take the lead.
The IRS examiner looked over everything we had prepared. She asked some questions, then said “Everything looks in order; there will be no change.” In addition to being well prepared, the accountant was able to properly evaluate the rapport between the client and the agent, and determine on the fly the best course of action. There is an artform to handling audits. It’s not only technical tax skills, it’s also people skills.
Case History #3
$70K Audit Bill Reduced to $8K
Duffy Financial Services had a client who was self employed, with gross sales about $200K and about $100K in expenses. Before coming to Duffy Financial Services this client had a different accountant and was selected for audit. That appointment was poorly handled by the previous accountant —they did not come to the audit with the proper receipts or records needed to handle the case properly. Because of the lack of preparation, the auditor threw out the $100K of expenses and assessed the taxpayer solely on the $200K with a resulting tax bill of $70K.
Duffy Financial Services elected to use a special disaster management technique called Reconsideration, in which we are allowed to present new evidence that was not presented at the previous examination. The audit was reopened and the new information was presented to the auditor in a way that was easy to see and understand. Our accountant organized a binder separated into sections by deduction category, with summaries and original bills along with evidence of payments made to bills.
There were 1 or 2 deductions that were not allowed but, in the end, the client’s $70K audit bill got reduced to $8K. This entire process took two years but the taxpayer was very happy with the end result. Our use of the correct process, along with a thorough, diligent compiling of the client’s data, receipts, bills, and records was what made the information clear and acceptable to the IRS.
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