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Miami Accounting Firm Kaufman, Rossin Discusses Five Red Flags Law Firms Should Consider to Avoid an IRS

Audit Miami accounting firm Kaufman, Rossin & Co., (www(dot)kaufmanrossin(dot)com), on e of the largest independent accounting firms in Florida, is providing law firms with advice on how to avoid an IRS audit. Miami, FL, February 07, 2012 -- Miami accounting firm Kaufman, Rossin & Co., (ww w.kaufmanrossin.com), one of the largest independent accounting firms in Florida , is providing law firms with advice on how to avoid an IRS audit. While many think the IRS selects tax returns randomly for audit, thatâ s far from tru e. The IRS chooses those with the highest potential return on the time and energ y they expend. The most common things they look at are clerical errors, obvious overstatements of deductions or understatements of income. To mitigate the risk of a law firm being audited, Scott Berger, CPA, tax princip al with Kaufman, Rossin offers the following five red flags for consideration: Is the firm an S Corp.? If so, look at the compensation for stockholders. Is the compensation paid to firm shareholders reasonable and justifiable? Officerâ s compensation is one of the first things that the IRS looks at when reviewi ng a return. If a shareholder earns a salary far below the market average or no ne at all this is a red flag. How does the firm handle expense reimbursements? Itâ s imperative that the firm has a policy and addresses the way expenses will be re ported. Attorneys shouldnâ t characterize personal expenses as business expenses and vice versa. Be sure to adequately document both the reimbursement policy and e xpense reimbursements. Was all that money spent on meals and entertainment truly for business purposes? Given the financial condition of the government at the federal, state, and local level, the enforcement of tax rules has gotten tougher. Where it may have been possible to get away with vague presumptions in the past, the IRS is now cracki ng down. Make sure the firm has support for these claims â best guess estimates and missing receipts wonâ t suffice. Firms may have to provide detailed information regarding the purpose of these ex penses, such as who they were entertaining, and what was the business purpose, e specially if it gets to the audit stage. Are firms properly handling client costs? Law firms should keep precise records and accurately allocate the expenses incur red on behalf of each client. Large trust account balances should not be shown on the balance sheet. If the firm has trust accounts for escrow funds, etc, the way it reports this mo ney will certainly be scrutinized by the Bar Association and IRS. Properly recor d and reconcile all trust account transactions and ensure any income is properly recognized as well. Law firms should plan ahead to identify issues and get the documentation they ne ed before year-end. The stress of scrambling to produce all records at the last minute often leads to inaccuracies and cutting corners. While itâ s on their mind no w, firms should make an effort to allocate a central location for all tax relate d documents year-round. Being thorough and accurate now will pay off when theyâ re un

able to avoid the hassles of an IRS audit. About Kaufman, Rossin & Co. Kaufman, Rossin & Co. maintains offices in Miami, Fort Lauderdale, and Boca Rato n. The firm has represented Florida businesses for nearly 50 years and serves in ternational clients in more than three dozen countries. It offers a complete arr ay of traditional accounting services, as well as consulting services specially tailored to clients' needs. The firm has twice been named the Best Accounting Fi rm to Work For in an independent survey sponsored by Accounting Today. With 300 members, the firm is large enough to provide versatility, but able to render the personal service upon which its reputation is based. For more information, visi t www.kaufmanrossin.com. Contact: Josh Merkin Account Director Kaufman, Rossin & Co Miami, FL 305-967-6667 josh.merkin@rbbpr.com http://www.kaufmanrossin.com/