IRS Alert: Audit Compliance Initiative Projects for March 2012

The IRS regularly conducts national, regional and local compliance initiative projects (CIPs) to study perceived areas of noncompliance. The IRS uses the data from these projects to develop more comprehensive projects and allocate its audit resources in the areas showing significant noncompliance.

Projects to be conducted through March regard Schedule C filers, taxpayers taking duplicate mortgage interest deductions of $10,000 or more on Schedule C and A, and filers claiming Employee Business Expense of more than $50,000 in deductions.

For Schedule C filers, the targeted group will have travel, meal and entertainment expenses. More specifically, they will have gross receipts of over $10,000, expenses greater than Schedule C income, and/or meal and entertainment expenses less than $1,000.  The IRS has determined that this taxpayer segment is deducting personal travel, meal and expenses to reduce taxable income and conceal meals and entertainment under travel expenses to avoid the 50% limitation.

Taxpayers taking duplicate mortgage interest deductions of $10,000 or more on Schedule A or C are being targeted in another CIP. This duplication results in under-reporting income tax and under-reporting self-employment tax from Schedule C.  Most of these return identified were self prepared.

The IRS will be conducting office audits for another CIP.  Taxpayers targeted in this Compliance Initiative Project are Form 1040 filers with employee business expense deductions of more than $50,000.

The projects scheduled to be completed by March 31st.

Full details on Part 1 of IRS Compliance Projects