BlumShapiro's Intervention With the IRS Results in Avoidance of Significant Tax Adjustment
A healthcare company that owns and operates several nursing homes was ordered to seek help in revising its accounting procedures to comply with both Connecticut and IRS regulations.
In addition to upgrading its policies and practices, previous accounting issues had been noticed by the IRS with a possible audit pending.
The company immediately contacted BlumShapiro based on our reputation as a leader in the healthcare industry. During the initial comprehensive review of prior tax returns and audits, we discovered three major issues — missing elections, improper deductions on prior returns, as well as an area — fair market value of rent — that we felt could be a red flag to the IRS.
We immediately compiled a team of healthcare industry experts to tackle these issues, first facilitating communication between the client owners, their original out-of-state accounting firm and the IRS. BlumShapiro worked with the company’s previous accountant, with whom the client still had a relationship. We were able to recommend an additional deduction that resulted in a savings in the current tax period.
BlumShapiro, known for its proactive approach to problem solving, took the lead in recommending an adjustment in accounting methods. The client, well aware of BlumShapiro's extensive tax expertise, applied our recommendation and was able to add back the adjustment over four years, resulting in audit protection on that issue.
Since the issue of fair market value of rent had already caught the eye of IRS auditors, we responded quickly and applied our industry experience to negotiations with the auditor, resulting in approval of the allowable deduction for the current and future years. Because we had taken a proactive approach and alerted the client, educating them on a variety of possible scenarios regarding the IRS audit, they were much better prepared throughout the audit process.
BlumShapiro's intervention with the IRS resulted in avoidance of a significant tax adjustment. Had this adjustment been enforced, two members of the healthcare company would have been forced to draw upon personal assets.
In addition, BlumShapiro's recommendations on the late election resulted in further tax savings, and the change in accounting method allowed the client to pay the tax over four years, resulting in a favorable cash flow advantage.
The client now enjoys peace of mind going forward, knowing that its records are accounted for properly, and BlumShapiro will be on board with assistance and advice for future business issues.