Wow, Kay & Ken, young parents of three stellar girls first watched their small real estate and construction business go broke, then in a nasty IRS Audit that followed their Divorce, they got a tax bill for $428,000!
Talk about Bad News coming in 3s, this threatened to ruin their lives. The good marriage did not survive the business failure and the following of the multi-year IRS audit of 2015 and 2016 was a THREAT to mental and financial health.
One of the worst parts was that the “Audits” were done without any input from the taxpayers or their certified public accountants. The audits were the work product of “SAD”, aka Spokane Audit Department the IRS Field Audit Office in Spokane, Washington.
SAD perfected their special auditing techniques on the audits of a Central Washington Rancher the year before they choose to audit Ken & Kay’s operations. The trick is to start an audit and then to not allow any evidence to be presented by using technical excuses to freeze out any deductions.
The SAD methods are not legal or ethical or fair in any way, but they do produce huge “Adjustments” that increase the “Score” of SAD’s Audit Team. Those audits were not the end of the story because SAD made a huge mistake. They audited Ken’s 2017 separate Form 1040 and they allowed our CPA firm to present evidence in “Proof Sets.”
We had brought Robert Kovacevich, Tax Attorney into the appeals of the ’15 & ’16 audits and something changed after he delivered his excellent Appeals to Seattle IRS. Maybe it scared them? We were then allowed to present our 2017 Proof Sets in an audit meeting of 2017.
The audit at SAD’s Headquarters in the Federal Courthouse in downtown Spokane was really FUN! We were so prepared that Ken’s income was REDUCED by our Proof Sets.
The IRS Auditor was Alex Cherkashin, R A who did a fair and competent job on the 2017 Audit. All of this was good and then it got better when the Appeals Officer sent the original two audits back to SAD! I had never seen an Audit sent back from Appeals to Audit in my 54 years of experience with IRS Audits.
The 2015 and 2016 Audits were done by Cherkashin and he was tough and thorough. We were also committed and after 3 hard days of professional auditing on both sides there was a tax due from Kay and Ken.
The tax was $ 9,600.
This was the biggest and most satisfying Audit/Appeal that I have ever had. The changes were earned by hard work by Ken & Kay and their team which included Robert Kovacevich, Attorney, Trent Snider, CPA, David Rosselet, staff accountant, Anne Avery, staff accountant and me.
There have been major changes in the Spokane IRS Field Audit Office which included the retirement of the long time supervisor at age 63. The new supervisor is doing his job from Seattle using modern age computers and screens. Things are always changing in our world.
We believe that the IRS can be efficient and fair when they do their work and we encourage them to consider these audits as a good lesson on how to correctly compute taxes due from taxpayers.
Anson Avery, CPA