Preparing Profit and Loss Statement for the IRS

Published: 02nd October 2010
Views: N/A

The IRS offers several programs to taxpayers with past-due federal income tax liabilities. The purpose of these various programs is to offer different ways for taxpayers to resolve their tax liabilities based on their unique financial situation. Some of the most common programs are the Offer in Compromise, Installment Agreement and Currently Not Collectible Status.

All of these programs require the IRS to perform a detailed analysis of the taxpayer’s financial situation. In order for this analysis to be completed, self-employed individuals will be required to provide the IRS with a Profit and Loss Statement. A Profit and Loss Statement is simply a document that lists all of the business income and business expenses over a specific period of time.

If the collection investigation is occurring during or shortly after April 15th, the IRS may be able to complete its analysis using the Schedule C from the taxpayer’s federal tax return. However, if the return is not available, or is outdated, the taxpayer may need to provide a separate Profit and Loss Statement. For some taxpayers, this can be a very challenging task. However, following a few simple rules can greatly assist you in this task.

Be accurate. You are required to provide complete and accurate information to the IRS. Therefore, you must take the time to make certain your Profit and Loss Statement is accurate. One way to do this is to use your monthly bank statements to create your Profit and Loss Statement. If you do not have all of the necessary statements in your records, ask your bank to provide them.

Be complete. Make sure you have accounted for all of your income and expenses on the Profit and Loss Statement. Taxpayers often make the mistake of leaving out basic business expenses. For example, a truck driver may forget to write down their fuel expense. Make certain you check your statement over twice to verify you have not forgotten any expenses.

Only list business expenses. Your Profit and Loss Statement should only list the expenses necessary to operate your business. You should not list your personal household expenses such as your home mortgage payment, personal insurance or none-business transportation expenses. The IRS will review the personal portion of your financial situation separately.

Consider getting professional help. Resolving your IRS collection matter can be extremely complicated and involved. Consider seeking assistance from a tax professional to help you prepare your financial information for submittal to the IRS and to negotiate a resolution of your IRS collection matter.

For your reference. Please find sample profit and loss statements below. One version is a profit and loss statement for rental income. The other version is a profit and loss statement for business income. The profit and loss statements are in PDF format. They are for your reference only. Please use them as guides as you prepare your own profit and loss statement for determining your rental and / or business income.

The Tax Lady Roni Deutch and her law firm Roni Deutch, A Professional Tax Corporation have been helping taxpayers across the nation find IRS tax relief for over seventeen years. The firm has experienced tax lawyers who can fight tax debts on your behalf.

Report this article Ask About This Article


Loading...
More to Explore