- 8 -
Over the course of 1992, petitioner’s company made cash
payments of $19,985 to Mr. Cook, $21,694 to Mr. Baker, and
$15,414 to Mr. Page. The payments were not included in the
appropriate employment tax returns. Petitioner, however, was not
aware in signing the returns that the payments to the workers had
been omitted.
Petitioner’s Individual Income Tax Return
During the review of his 1992 individual income tax return
with Mr. Messmer, petitioner informed Mr. Messmer that he had not
received all of the amounts which were reflected on the company
accounts as his personal draw. After further investigation, Mr.
Messmer became aware that the payments coded as petitioner’s
personal draw included the cash payments made to the workers.
Mr. Messmer therefore made an adjusting entry to petitioner’s
draw account by subtracting the cash payments to the workers and
adding those payments to the labor expense account under cost of
goods sold. Petitioner's 1992 individual income tax return was
selected for examination in 1995. In the course of the
examination, the revenue agent noticed that the cost of goods
sold reported by petitioner varied from the figure carried on the
company’s books by $57,000. Petitioner initially did not know
the reason for the discrepancy, but he later informed the revenue
agent that the discrepancy was attributable to the cash payments
made to the workers.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011