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Is there an audit risk to amend a return the second time to reduce business expenses?

Level 3

Hi,

Is there an audit risk to amend a return the second time to reduce business expenses?

A tax payer came to me to amend a 2019 return I did not prepare.  This amendment will be the second time he/she will be amending the 2019 returns. Amending this return will involve reducing Schedule C business expenses up to about $55K increasing his/her tax liability substantially.

a. Will this amendment increase his/her audit risk even though he/she will pay more money to IRS? 

b. Taxpayer wants her income increased so he/she could qualify for a bank loan. Will this be a reasonable reason from IRS perspective? I doubt it will be, but wants additional expert opinion.

Any advise will be much appreciated.

Thank you.

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Level 15

"...b. Taxpayer wants her income increased so he/she could qualify for a bank loan."

Audit risk shouldn't be part of the consideration, ever.......

In this case what is being considered is illegal as hell; it's mortgage fraud, and both your client and YOU could be subject to fines, penalties & jail time.

 

 

Former Chump..umm... AllStar.
"the game of life is hard to play"

If a post answers your question, click on *Accept as solution* for future searches

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7 Replies 7
Level 15
Level 15

"b. Taxpayer wants her income increased so he/she could qualify for a bank loan. "

Big red flag!


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
Level 3

What is your take on concern # a?

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Level 15
Level 15

Im honestly not sure what IRS uses for audit flags...what did the original return look like?   Why did they amend the first time?  how different is it from the prior year's return when you add this income?


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
Level 15

"...b. Taxpayer wants her income increased so he/she could qualify for a bank loan."

Audit risk shouldn't be part of the consideration, ever.......

In this case what is being considered is illegal as hell; it's mortgage fraud, and both your client and YOU could be subject to fines, penalties & jail time.

 

 

Former Chump..umm... AllStar.
"the game of life is hard to play"

If a post answers your question, click on *Accept as solution* for future searches

View solution in original post

Level 15

Potential fraud issues aside, perhaps @BobKamman could offer his view on audit risk related to successive filing of 1040X's since he has good experience working with the IRS.

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Still an AllStar
Level 3

Thank you all for your perspective and expert advise. Very helpful. I am glad I am part of this great and  responsive community Much appreciated!.

 

 

Level 15

You can suggest to the client that you would be glad to review everything to determine what is Right. Not what they want to manipulate.

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