Question

Sam, a CPA, is representing Fred before the Examination Division of the Internal Revenue Service. The Internal Revenue Service is questioning Fred on his Schedule C gross income that is listed on the 2017 tax return. While reviewing the documentation Fred provided, Sam discovers income that was omitted from the tax return. What is the appropriate action for Sam to take?

Answer 1

Sam must contact Fred and tell him about the omission and the likely consequences of not including it in taxable income.

Step-by-step explanation:

The CPA member, Sam must contact Fred timely to inform him about the omission and the likely consequences of the omission. Sam must advise him to include this in his taxable income. Fred must be advised that the inclusion of this income is good for both of us because if it is not included and that the Sam didn't reported this tax evasion then Sam will also be held responsible for not reporting tax evasion to tax authorities.