California corp.

Tony Cox wrote:
Each year (as I understand it), the IRS top brass have a
meeting to decide exactly what criteria will be used to
decide who gets audited. This is in addition to the 'base
rate' random auditing. Anything 'unusual' can only increase
your chance of being audited if it is statistically worth
devoting the auditors time to it. Tax fairness be damned;
its the $$$'s they want.

The above description does not remotely describe how IRS annually
manges its enforcement programs. They do not do random audits, nor
does "top brass" decide on minute matters such as private aircraft
usage to be a target. The potential effect of claiming private
aircraft expenses is that they tend to be large, inflating travel
expense deductions relative to size and scope of the business. If
selected for audit, it would be on that basis.

Fred F.

"TaxSrv" wrote in message
...
Tony Cox wrote:
Each year (as I understand it), the IRS top brass have a
meeting to decide exactly what criteria will be used to
decide who gets audited. This is in addition to the 'base
rate' random auditing. Anything 'unusual' can only increase
your chance of being audited if it is statistically worth
devoting the auditors time to it. Tax fairness be damned;
its the $$$'s they want.

The above description does not remotely describe how IRS annually
manges its enforcement programs. They do not do random audits, nor
does "top brass" decide on minute matters such as private aircraft
usage to be a target. The potential effect of claiming private
aircraft expenses is that they tend to be large, inflating travel
expense deductions relative to size and scope of the business. If
selected for audit, it would be on that basis.

Fred F.

If you can more properly describe the process, please do.
Since I don't believe the depreciation schedules even requires you
to list an aircraft specifically, clearly it can't be used as an
initial criterion. But such travel expenses vs. income can be
easily tested for and used as a trigger, as I said in another post.

As for 'random' audits, from what you say, entities (people
or corporations) are in no danger whatsoever of being
audited if they report earning and expenses according to
industry norms. Somehow, this doesn't ring true.

"Tony Cox" wrote:
The potential effect of claiming private
aircraft expenses is that they tend to be large, inflating travel
expense deductions relative to size and scope of the business. If
selected for audit, it would be on that basis.
Fred F.

If you can more properly describe the process, please do.

Way off topic, but the IRS computer use a multivariant statistical
analysis (discriminant function), which only in part weighs deductions
against income.

But such travel expenses vs. income can be
easily tested for and used as a trigger, as I said in another post.

They cannot easily program the big computer to do that, nor would
they, as this method was used up to about 1970 and was scrapped as
unproductive.

As for 'random' audits, from what you say, entities (people
or corporations) are in no danger whatsoever of being
audited if they report earning and expenses according to
industry norms. Somehow, this doesn't ring true.

Filing such a return is a criminal offense even without proof of tax
evasion purpose. In the realm of actual tax fraud, taxpayers don't
make up income/deductions in a manner such as using industry averages,
so tax criminals must know this is a most foolish way to go about it
(and legally they are wise).

It is a myth that when returns are processed, IRS people look for "red
flags," except for extreme situations like tax protest returns.
Further, the number of returns filed which claim business travel in
single-engine aircraft would be very small according to GAMA
statistics, so there's little reason for IRS to consider it a big
compliance problem. The issue gets covered in the normal course of
audit selections.

Fred F.

"TaxSrv" wrote in message
...
"Tony Cox" wrote:

As for 'random' audits, from what you say, entities (people
or corporations) are in no danger whatsoever of being
audited if they report earning and expenses according to
industry norms. Somehow, this doesn't ring true.

Filing such a return is a criminal offense even without proof of tax
evasion purpose. In the realm of actual tax fraud, taxpayers don't
make up income/deductions in a manner such as using industry averages,
so tax criminals must know this is a most foolish way to go about it
(and legally they are wise).

Yes, but legality aside, how exactly would they get caught if
not through a random audit? If selection (for audit) is predetermined
by income/deduction criteria, then filing according to industry averages
would seem to be a rather sensible strategy for a tax criminal to pursue.
Assuming, of course, that they would pay less tax in the process.