kaz, Trader Status is tricky and unique.
Most regular taxpayers really need a tax pro to do their taxes, BUT many, many people MAY do them themselves. My web site offers tips on how to do that. I hope to add much more during the year.
BUT once you are selected for AUDIT, that's it. No more doing it yourself!
My advice is to immediately retain a CPA thoroughly familiar with Trader Status. You are likely causing much "damage" as you talk with the "friendly" agent. For instance, at this stage the audit quite likely can not be transferred to a CPA who is not in your home town, unless it is being done by mail???
Upon notice of ANY inquiry by the IRS the first thing a taxpayer should do is retain a CPA and transfer all the books and records to that CPA. Then the audit is hopefully moved to the CPAs home office, away from the taxpayer.
In your case, if this is a "MAIL audit", you can retain myself or any CPA, EA or Tax Attorney who is familiar with Trader Status and is willing to pickup "the mess" right in the middle of the audit.
If this is an OFFICE audit or a FIELD audit where you have actually met face to face with an agent (the more agents you have seen the worse it is getting) then you should immediately retain a CPA familiar with trader status, and if you can't find one, go to a large CPA firm and pay the price to have them get educated while billing you. You really MUST NOT attempt to deal with the agent(s) directly.
The CPA needs to review your work to first fix any problems with the return as filed, then s/he needs to deal with the IRS audit issues, you will sign a power of attorney for the CPA and from then on all communication between the IRS and you stops, the audit is put on "hold" to give the CPA time to get up to speed, and then your tax pro represents your best interests.
At this point you can/SHOULD consider the "bottom line" here. The cost of representation at this stage may be more than the IRS is looking for in taxes??? The longer you wait, the worse it will get and the representation costs just go higher. Sorry to be the bearer of the bad news.
DANGER of just settling now w/o a CPA is that your mark-to-market election will likely be killed by the audit (per the way they are treating you), meaning your following year tax return may need to be amended, and then you might elect MTM for 2001 if you want to.
Anyway, Good Luck with it.
Let me know how you make out. Always interested in what the IRS audit dept does with a trader status return.
Colin Cody, CPA
traderstatus.com |
