#audit
Audit
Independent audit and assurance engagements — SOC 2, financial statement audits, internal controls testing, evidence collection, and audit readiness for service organizations and growing businesses
Besicorp v. Commissioner: Why the IRS Couldn't Collect a $380 Million Penalty — and What a CDP Hearing Can Do for Your Business
In Besicorp Group v. Commissioner (June 29, 2026), the Second Circuit blocked IRS lien-and-levy collection of $380 million in tax-shelter penalties because the Appeals Officer never verified written supervisory approval under IRC § 6751(b) — even though the penalties were already final after Tax Court. Here is how the Collection Due Process hearing works, what the ruling does and doesn't change, and the five steps a small business should take after a lien or levy notice.
Commingling Personal and Business Funds: How One Bad Habit Kills Deductions, Invites Audits, and Pierces Your LLC Shield
Mixing personal and business money in one account can void your LLC's liability shield, get legitimate deductions disallowed for lack of substantiation under IRC Section 162, and turn a routine audit into a full transaction pull. Here's what commingling looks like, why courts and the IRS punish it, and a five-step cleanup plan.
Dee v. Commissioner: When Is an IRS Audit Still 'Open' for a Whistleblower Award?
In Dee v. Commissioner (167 T.C. No. 1, July 2026) the Tax Court ruled an IRS examination stays legally "open" for whistleblower jurisdiction until formally closed under Rev. Proc. 2005-32 — yet denied Dee an award because auditors had independently found the same $2 million deficiency a month before his tip, which was built entirely from public SEC filings.
Drake Plastics v. IRS: What the Micro-Captive Listed-Transaction Ruling Means for 831(b) Owners
In April 2026, a Texas federal court vacated the IRS rule that automatically branded micro-captives with loss ratios under 30% as listed transactions — eliminating the $200,000-per-year penalty tier — while upholding the 60% transaction-of-interest disclosure requirement. Here is what 831(b) captive owners must still file, and why loss ratios now determine your entire compliance posture.
Jones Bluff v. Commissioner: Why LLC Members Get No Seat at the Table in a BBA Partnership Audit
In Jones Bluff, LLC v. Commissioner (166 T.C. No. 6, March 2026), the Tax Court dismissed a Fifth Amendment due-process challenge to the BBA centralized partnership audit regime on standing and ripeness grounds — confirming that individual partners get no notice or hearing rights during an entity-level audit. Here's how the regime works, who qualifies for the small-partnership election-out, and what LLC members should fix in their operating agreements before an audit starts.
Jones Bluff v. Commissioner: What the BBA Partnership Audit Ruling Means for Your Multi-Member LLC
In Jones Bluff, LLC v. Commissioner (166 T.C. No. 6, March 2026), the U.S. Tax Court rejected a due process challenge to the BBA centralized partnership audit regime, ruling partnerships lack standing to assert individual partners' rights. Here's what multi-member LLCs should do — from vetting the partnership representative to the 45-day push-out election and electing out of BBA.
She Claimed $3,900 in Gas on Under $40 of Receipts: What a Tax Court Loss Teaches Every Side Hustler About Recordkeeping
In Lucas v. Commissioner (T.C. Memo. 2026-22), the Tax Court disallowed ~$30,000 in Schedule C losses from an informal caregiving side hustle — gas receipts under $40 against $3,900 claimed — and upheld 20% accuracy penalties. Here's the three-factor business test, the Cohan rule's hard limits, and the recordkeeping habits that would have changed the outcome.
Piton Holdings v. Commissioner: How a $41.6 Million Easement Deduction Shrank to $800,000 — and What Partnerships Should Learn
In Piton Holdings, LLC v. Commissioner (July 2026), the Tax Court cut a $41.6 million conservation easement deduction to $800,000, upheld the 40% gross valuation misstatement penalty, and voided $40.3 million in allocations to investors whose money arrived after the donation was recorded — two lessons on defensible appraisals and mid-year partner timing that apply to any LLC.
You Can Lose the Hobby-Loss Case and Still Beat the Penalty
In Schumacher v. Commissioner, the Tax Court ruled an 18-year money-losing quarter horse operation a hobby under Section 183 and disallowed $191,179 in deductions — yet waived the full $33,520 accuracy-related penalty because the couple reasonably relied on their enrolled agent of 20 years. How the reasonable-cause defense works, and what side-business owners should document.
A Tax Court Judge Just Told Treasury Its Own Regulation Doesn't Count
In Siemens Medical Solutions USA, Inc. v. Commissioner (167 T.C. No. 5, 2026), the Tax Court struck down Treasury's Extraordinary Disposition Rule, restoring a full $315 million Section 245A dividends-received deduction because the regulation added conditions absent from the statute's plain text. What the ruling, decided under the post-Loper Bright standard, means for any business relying on regulatory limits that outrun the underlying law.
United States v. Castro: What a Tax Preparer's 188-Month Sentence Means If Someone Else Signs Your Return
The Fifth Circuit affirmed a 188-month sentence for tax preparer John Anthony Castro, whose fabricated Schedule C and Schedule A deductions caused an estimated $15.2 million tax loss across 200-plus clients. Clients remain legally liable for falsified returns — here are six checks to vet a preparer, plus how Forms 14157 and 14157-A report misconduct.
Branch v. Commissioner: Where the Cohan Rule Stops Working for Travel Deductions
In Branch v. Commissioner (2026), the Tax Court estimated rent and utilities deductions under the Cohan rule for an unfiled personal care business — but denied all travel and entertainment deductions under IRC Section 274(d), which demands strict records of date, amount, place, and business purpose that courts cannot estimate around.