IRS Tax Audit Manual for the Reforestation Industry
IRS Tax Audit Manual for the Reforestation Industry was designed to assist Internal Revenue Service Audit Agents in completing examinations of reforestation contractors. A contractor working in the reforestation industry may secure service contracts, (pre-commercial thinning and tree planting contracts) from a Federal agency, a State agency, from private companies, or other contractors. Keep in mind that State and Federal agencies issue several types of service contracts; examples are fire-fighting, cone collection, tree netting, tree shading, gopher baiting, etc.
At this time, it does not appear that the reforestation-station contractors bid for service contracts other than tree planting and tree thinning. However, no industry is stagnant and this may be something that contractors may expand into in the near future as they develop expertise in the reforestation industry. Since the most predominant type of service contract issued by the Federal and State agencies are pre-commercial thinning and tree planting contracts, the scope of this guide has been limited to reforestation contracts only.
WHAT SPECIFIC QUESTIONS WILL THE IRS AUDITOR ASK?
Here is a sampling of the 40 questions we have specifically identified.
- How long have you been in the reforestation business?
- How did you get started in the business?
- Are you a prime contractor or subcontractor?
- Were there any months that you did not work?
- How are you paid for the work that you do?
- What tools do you supply for the workers?
- What accounting method is used?
- What is your bill payment policy?
- Who makes your deposits?
- Are all wages included on the tax return?
- Do you have a credit line? If so, are income checks deposited into this account?
- Do you issue Forms 1099 to all subcontractors?
- Do all your subcontractors have a Farm Labor License
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From Chapter 5 –
When interviewing reforestation contractors, specific emphasis should be given to the areas where non-compliance has proven to be the highest and to those which may, at a later date, be presented as a defense against understatement of income. Since it is not uncommon to find that some contractors have little or no fluency in English, it is important to determine if the assistance of an interpreter will be required or available prior to the initial appointment.
The understatement of income and failure to pay employment taxes are the primary, but by no means the only, areas of adjustment on the contractors’ returns. Defenses against the understatement of income can be cash hordes, loans, or gifts in the case of non-specific understatement, misunderstanding or poor communication with the return preparer; these are the more common in specific understatements.
AND THERE’S MUCH, MUCH MORE…
The SECRET IRS MANUAL written specifically for Internal Revenue Service Audit Agents to use while conducting audits of Reforestation Industry.
In the time that it takes you to read 50 pages – you will be fully prepared with ALL the information you need to survive an Audit from the IRS!