Internal Revenue Service Case Study

Register to read the introduction… In this case the best approach to IRS examination is to promptly and fully cooperate from the outset, it will show them a good faith. According to the scenario shown here he failure the appointment, and he didn’t contact to examiner office right away to re-schedule. He needs representation, whereby he should fill out and sign a form 2848, power of attorney and declaration of representative, authorizing the CPA to represent him before the IRS, which in this case would be Sue Johnson, CPA. He definitely would need to bring all supporting documentation to substantiate the deductions, relating to travel expenses, entertainment expenses, and charitable …show more content…
The entertainment expenses, which must be ordinary and necessary and related to the business, he can deduct these expenses if he has for entertainment a client, customer or employee. The deduction has to meet the following test:

- Directly –related test
- Associated test

Directly Related test
To be deductible under this test you must be able to show
- You had more than general expectation of a specific business benefit or getting income at a future time.
- You engaged in business with the person being entertained during the entertainment period.
- The main purpose of the entertainment was actively conduct business.

Associated test
To be deductible under this test must be able to show
- The entertainment was associated with the active conduct of your trade or business.
- The entertainment directly preceded or followed a substantial and bona fide business discussion.

In general only 50% of your business-related meal and entertainment expense can be