TABLE OF CONTENTS

• CHAPTER 1 — INTRODUCTION
  • Purpose and Nature of the Information in This Report 1-1
  • Scope of Industry Audited 1-1
  • Illustration of the Related Transportation Industries 1-2
  • Corporate Issues 1-3
• CHAPTER 2 — GENERAL BACKGROUND INFORMATION
  • General 2-1
  • Government Regulation 2-1
  • Effect of Deregulation 2-2
  • Federal Agencies 2-3
  • Interstate Commerce Commission (ICC) 2-3
  • U.S. Customs 2-3
  • Department of Transportation (DOT) 2-3
  • Federal Maritime Commission (FMC) 2-4
  • State Agencies 2-4
  • Public Utilities Commission (PUC) 2-4
  • Department of Motor Vehicles (DMV) 2-4
  • Effect of Government Regulation on Audit 2-4
• CHAPTER 3 — PLANNING THE AUDIT
  • Introduction 3-1
  • Pre-Audit Planning 3-1
  • Related Party Transactions 3-3
  • Information Document Requests 3-5
  • Initial Interview 3-6
  • Site of the Examination 3-6
  • Tour of the Business Premises 3-6
  • Initial Interview Questions 3-7
• CHAPTER 4 — OPERATIONS AND ACCOUNTING RECORDS
  • Common Carriers 4-1
  • Operating Authority 4-1
  • Tariffs 4-1
  • Contract Carriers 4-2
  • Accounting Records 4-2
  • Accounting or Transactional Cycle 4-3
  • Sources of Revenue 4-5
  • Unreported Income 4-6
  • Expenses 4-9
  • Schedule 4-13
  • Payables 4-15
  • Other Liabilities 4-15
  • Petroleum Carriers 4-16
  • Accounting Records 4-17
  • Income 4-18
  • Expenses 4-20
  • Labor Leasing Companies 4-21
  • Accounting Records 4-21
  • Income 4-21
  • Expenses 4-22
  • Leased Employees 4-22
  • Independent Contractors 4-25
  • Types of Independent Contractors 4-26
  • Operating Authority 4-26
  • Selection of Subhauler Returns for Audit 4-26
  • Accounting Records 4-29
  • Income 4-29
  • Expenses 4-30
  • Multiple Owner-Operators Using the Same DBA 4-33
  • Shipper’s Agents 4-34
  • Agent – Principal Relationship 4-34
  • Accounting Records 4-34
  • Income 4-35
  • Railroad Rebates 4-35
  • Expenses 4-35
  • Insurance 4-36
  • Trade Associations 4-36
  • Trade Publications 4-36
  • Freight Forwarders 4-37
  • Types of Freight Forwarders 4-37
  • Types of Shipments 4-39
  • Accounting Records 4-40
  • Income 4-40
  • Gain or Loss on Foreign Currency Transactions 4-41
  • Insurance Premiums 4-42
  • Expenses 4-42
  • International Issues 4-43
  • Trade Associations 4-45
  • Trade Publications 4-45
  • Customhouse Brokers 4-45
  • Licensing Requirements 4-46
  • Income 4-46
  • Transactional Analysis 4-46
  • Expenses 4-48
  • Insurance 4-49
  • Penalties 4-49
  • Trade Publications 4-49
  • Trade Associations 4-49
• CHAPTER 5 — EMPLOYMENT TAXES
  • General 5-1
  • Employee or Independent Contractor 5-1
  • Classification as an Employee 5-3
  • Common Law Factors 5-4
  • Porthaulers 5-6
  • Casual Labor 5-6
  • Audit Techniques 5-7
  • Other Employment Tax Adjustments 5-8
• CHAPTER 6 — EXCISE TAXES
  • Introduction 6-1
  • Heavy Vehicle Use Tax (Form 2290) 6-1
  • Audit Techniques 6-2
  • Quarterly Federal Excise Tax (Form 720) 6-4
  • Fuel Tax 6-5
  • Audit Technique 6-6
  • Retail Taxes 6-6
  • Audit Techniques 6-6
  • Other Excise Tax 6-7
• CHAPTER 7 — PENALTIES
  • Information Return Penalties 7-1
  • IRC Section 6721 – Failure to File Correct Information Returns 7-1
  • IRC Section 6722 – Failure to Furnish Correct Payee Statements 7-1
  • Back-up Withholding 7-2
  • Audit Technique 7-4
• GLOSSARY
  • Terminology G-1
  • Abbreviations G-9