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Petitioner showed some of those documents to Hughs at a
meeting on August 24, 2001. However, he did not provide a
history of the Schedule C business or statements of employee
reimbursement policies from the employers. Immediately after
that meeting, Hughs asked petitioners to provide documentation of
their employee business expenses, depreciation, travel expenses,
and telephone expenses not later than October 1, 2001.
2. Examination of Petitioners’ 2000 Tax Return
Hughs informed petitioners that their 2000 income tax return
was being audited relating to miscellaneous itemized deductions,
cash contributions, and Schedule C expenses. Hughs received a
letter on October 9, 2001, stating that petitioner did not know
when he would be available for a meeting and informing Hughs that
he would wait to have his 2000 income tax return audited.
Petitioners did not provide Hughs with any of the documents she
had requested. Petitioner and Hughs rescheduled the second
meeting for November 26, 2001. Petitioner called Hughs to
reschedule the November 26 meeting for December 13, 2001.
Petitioner later called Hughs to reschedule the December 13
meeting for January 10, 2002. Hughs agreed. Neither petitioner
met with Hughs on January 10, 2002.
Hughs met with petitioner on February 8, 2002. Hughs issued
another request for documents to petitioners dated February 21,
2002, seeking substantiation of various expenses and an
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