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The business I work for went through a similar issue a few years ago. We were audited by our local IRS office when the amount of excise taxes deposited was found to be under what the gov’t thought a business our size should be generating. It took a year to conclude and no adjustments were needed. Fortunately, I was able to handle it without attorneys and accountants...
every quarrter the IRS issues the numbers for the bankruptcy court for the maximum allowable living expenses under bankruptcy law. (it happens as a matter of routine but debt counseling sleazes try and scare people by saying the law is changing)
This is a non story because she was flagged by the same programming rule that flags the rich import/export business person who only makes 12 grand per year but lives on the ocean and has two summer homes.
If she is a hairdresser, she receives tips.
She receives EIC (wealth redistribution), probably over $7000 per year.
She lives with her parents, supposedly pays rent. Also likely she “pays” her mom for child care, and takes a child care tax credit (more wealth redistribution).
I know a single mom in that exact situation and that's what she does.
The subsidization of the “working poor” is quite a racket and I’m not surprised some folks get flagged for audit.
Just last month I received an audit notice. I don’t have any of those freebies but in that tax year I received an award from my factory, and the cost was reported on a 1099. On my return I overstated the amount by $1 (a typo) so there was no matching amount for the 1099 on my return. Bingo, audit.
Since it was an overstatement, in my response I told them if the correction resulted in a refund to me they could keep it.
Who should really be investigated by the IRS is H&R Block for charging a few hundred bucks to fill out a 1040EZ, the bastards.
That's precisely what EITC is.
And in her stocking will be a fine for the insurance she can’t afford.
Here they audit this poor woman because she does not make enough money and the IRS’s own employees claimed the housing credit falsely. It is a big joke. The IRS needs to audit the Chicago mob and Obama.
IRS audited him for those three years, and I proved the legitimacy of each dollar of expense, and the fact there was a definite profit motive.
At the conclusion of that 3 hour interview, the IRS auditor allowed everything.
In 20 + years of dealing with IRS agents, I've never had a problem with them. Not saying they're perfect, but the ones I've dealt with are quite professional.
Food stamps does this too. They are suspicious if you show too little money coming in.
She’s working under the table. Why would anyone making $18k pay for H&R to fill out their 1040 EZ form?
IMHO, this is not the kind of publicity a CPA firm would desire. The idea is to not be audited, let alone an audit for a lower income person.
I'll bet her return was prepared as an accommodation to her father. It was given to a newer accountant, or admin assistant, and no questions were raised about unreported income.
An old image, but a timely reminder.
BTW, they have an "expected tip amount" for a list of professions in different areas. If you report less than that, expect an audit. The expected amount never gets adjusted downward either (like it should be when the economy is in the sewer).