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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 7195
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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My individual tax return for year 2010 is being audited by

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My individual tax return for year 2010 is being audited by the IRS Small business and Self Employed department. They are mostly looking at some deductions my husband took on a schedule C for some work he did as a "sole proprietor." We also own S-Corps and our S-Corps declared large losses that year that carried down to our personal taxes and contributed to our refund for 2010. But it does not look like they are technically auditing the S-Corp businesses. If they want to Audit the S-Corps as well can they do it in this audit or do they have to declare additional audits for the S-Corps separately since they are separate tax entities from our personal taxes? I hope that makes sense. I guess I am asking are they allowed to basically start to "Audit" the S-Corps when the audit was called on our personal tax return not our business tax returns? Seems like that is a separate audit. Also if not how much do we even have to explain those deductions to her in the audit from the S-Corps?

Stephen G :

Hi & thanks for using our service. I'll do my best to give you a complete & accurate answer. Please ask me to clarify anything that is not clear.



Stephen G :

They can audit the S-Corps and anything else they want without formally "declaring" an audit on the corporations. In fact, it would be impossible to do an audit of your personal returns without doing some type of examination of your S-Corp losses as they are reflected on your personal returns. You may find that they will have a checklist to follow just to make sure the S-Corps are filing everything they are required to file, or they may delve into the figures because of the losses reflected on your personal return.


Okay thank you.

Stephen G :

Don't be surprised if they take a look at your 2009 and 2011 returns also; this is a common situation. Of course the normal statute of limitations on 2009 expires 3 years from when your 2009 tax return was filed in 2010 or April 15, 2010 whichever is later.


Whey you say take a look at do you mean they will just want to see the returns or run a full audit on those as well?

Stephen G. and 2 other Tax Specialists are ready to help you

It depends upon what they find in 2010; if they don't find anything, then they most likely won't do much if anything on the other years; if they do, then you should expect that they will look for similar adjustments in the other years.

One thing to consider; if it starts to get dicey, you may want to get a CPA involved to represent you. The audit usually goes a little differently that way, even if the CPA didn't prepare the returns; the IRS just deals with us differently than they do taxpayers.

If you had a CPA do the returns in the first place, it is important to involve him or her in the IRS audit; if they no longer represent you, then get another one involved.

In any event stay calm, give them whatever they want; be co-operative and if they are on site, attach a high priority to getting them what they are asking for and nothing extra. Don't volunteer any extra information, the more you say, the more they have to question.
Stephen G. and 2 other Tax Specialists are ready to help you

Somehow when you gave me your rating of Excellent, it didn't go through; I think because I was still typing at the time. So I switched to this Q/A format which usually fixes the problem, but in this case your rating disappeared. Could you please re-submit your rating now, in order that I can receive credit for my response? Thanks very much.
Customer: replied 4 years ago.

Okay I think I did what you asked.