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However, if the accountant is appropriately engaged by counsel, the common law attorney-client privilege should apply to all communications rendered in furtherance of the legal services being provided to the client, both during the investigative stages of the audit and, if necessary, during any subsequent civil or criminal litigation.
Intent is distinguished from inadvertence, reliance on incorrect technical advice, sincerely-held difference of opinion, negligence or carelessness.
Section 6663(a) provides that, if any part of an underpayment is due to fraud, there shall be added to the tax an amount equal to 75% of the portion of the underpayment which is attributable to fraud.
The IRS bears the burden of proving by clear and convincing evidence that: (1) An underpayment of tax exists; and (2) some portion of the underpayment is attributable to fraud.[i] In the case of a joint return, intent must be established for each spouse separately and the fraud of one spouse cannot be used to impute fraud to the other spouse.
Original documents obtained from the taxpayer or third parties should not be marked, indexed, hole punched, or in any way altered by the compliance employee.
Also, it is critical that the compliance employee attempt to secure the taxpayer’s explanation(s) for any discrepancies. [iv] Internal Revenue Manual 188.8.131.52 () [v] See Gajewski v.