Should substantiation problem be disclosed at start of audit

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Reference no: EM133577377

Question

Carl Contractor, the owner of a construction business, receives a phone call from a revenue agent with IRS who indicates Carl's Form 1040 joint return for 2014 has been selected for audit. Carl at first thought the call might be a fraud scheme to steal his identity. However, the call was legitimate and the agent informs Carl that she will want to focus in particular on his Schedule C construction business. During the phone call, the agent asks some questions about Carl's business practices. Carl tells you, his CPA who prepared the return, that he isn't so sure he can provide substantiation for the expenses claimed on his business Schedule C, despite his telling you at the time his return was prepared that substantiation was not a problem. Carl is concerned about the round numbers used for the deductions and about how the substantiation is not as complete as he would like. Carl wants you to handle the audit. Should the substantiation problem be disclosed at the start of the audit? What are the considerations?

Reference no: EM133577377

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