IRS Cash Intensive Businesses Audit Techniques Guide (ATG)

Publication Date:  April 4, 2010

Businesses that have substantial cash transactions are included in the consolidated Cash Intensive Businesses Audit Techniques Guide (ATG). Some of these businesses include bail bonds, beauty shops, car washes, check cashing establishments [under development], coin operated amusements, laundromats, scrap metal, some convenience stores, and Taxicabs. Guidance is also provided on examination of income, interview techniques, and evaluation of evidence.

This guide is current through the publication date. Since changes may have occurred after the publication date that would affect the accuracy of this document, no guarantees are made concerning the technical accuracy after the publication date.

This Audit Techniques Guide (ATG) is presented in several chapters. These chapters can be accessed and then printed by following the links in the Table of Contents below.

Chapter 1: Introduction and Overview of the Cash Intensive Business

Chapter 2: Pre-Audit and Background Review of the Tax Return

Chapter 3: Initial Interview

Chapter 4: Minimum Income Probes

Chapter 5: Examination Techniques

Chapter 6: Evaluating Evidence

  • Techniques to Corroborate or Refute Income-Related Items
  • Evaluate the Initial Facts Concerning the Non-Taxable Sources and the Current Status of the Audit
    • Other Considerations
  • Examples of Using Specific Industry Audit Techniques
  • Special Focus Issues
      • Net Operating Loss and Passive Activity Loss Considerations
      • Employment Tax Issues
      • Inadequate Records
      • Proper Development of Cases
      • Fraud Considerations
    • Cash Hoard

Chapter 7: Digital Cash

Chapter 8: Underground Economy

Chapter 9: Bail Bonds

  • Bail Bond Defined
  • State Control
  • Transacting Bail
  • Surety Contracts
  • Subagents
  • Books and Records
  • Terminology
  • Internal Sources of Information
  • Third Party Sources
  • Initial Interview
  • Required Filing Checks
  • Primary Audit Issues and Techniques
    • Gross Income
    • Income from BUF
    • Premium Income
    • Reimbursed Expenses
    • Collateral
    • BUF Payment Deductions
    • Bond Costs
    • Change in Accounting Method
    • Establishing Fraud

Chapter 10: Beauty Shops

  • Beauty Salon Defined
  • Income
  • Salon Income
  • Service Income
    • Method 1-Service Income Formula
    • Example-Service Income Formula
  • Retail Income
    • Method 2-Retail Income Formula
    • Method 3-Retail Income Formula
    • Example-Retail Income Formula
  • Rental Income
    • Method 4-Rental Income Formula
    • Example-Rental Income Formula
  • Employee vs. Independent Contractor
  • Tips
    • Determining a Tip Rate
    • Calculating Unreported Tips
  • Other Audit Considerations
  • Initial Interview and IDR
  • Glossary

Chapter 11: Car Wash

  • Car Wash Defined
  • Internal Sources of Information
  • External Sources of Information
  • Audit Techniques
    • Income
    • Water Consumption Method
    • Water Consumption Formula
    • Soap/Chemical Consumption Method
    • Soap/Chemical Consumption Formula
    • Expenses
  • Initial Interview and Information Document Request
  • Case Studies
  • Glossary

Chapter 12 Check Cashing Locations (Under Development)

Chapter 13: Coin-Operated Amusements

Chapter 14: Convenience Stores, Mini-Marts, and Bodegas

Chapter 15: Laundromats

    • Overview
    • Income
  • Initial Interview and Information Document Request
  • Utility Consumption Analysis

Chapter 16: Scrap Metal

  • Introduction
  • Purchasers of Scrap Metal
  • Sellers of Scrap Metal

Chapter 17: Taxicabs

  • Taxicab Industry Defined
  • Regulatory Environment of the Taxicab Industry
    • Certification, Licensing and Permits
    • Taxicab Rate Schedule
      • Determining the Applicable Rates and Fees
  • Sources of Taxicab Industry Information
    • External Sources of Information
    • Internal Sources of Information
  • Primary Audit Issues
    • Books and Records
      • Income
      • Expenses
    • Tips
      • Determining Tip Income
      • Calculating Unreported Tips via Credit Card Sampling
      • Tips vs. Finder’s Fees
    • Employee vs. Independent Contractor
      • Checking Worker Classification
  • Audit Techniques
    • Taxicab Companies
    • Taxicab Owners/Operators
    • Taxicab Drivers
      • Using the Taxi Formula (a.k.a. the “Cab Formula”)
      • Taxi Formula Example
  • Initial Interview and Information Document Request
    • Background
    • Operations
    • Books and Records
    • Examining Tax Returns
  • Glossary of Taxicab Terms
  • Tax Law, Regulations, Court Cases, and Other Authorities
    • Internal Revenue Code
    • Revenue Rulings/Procedures
    • Revenue Ruling 87-41, 1987-1 C.B. 296, discussing twenty common-law factors considered in determining whether a worker is an employee or independent contractor
    • Court Cases
    • Publications


QuickStart Guide to Accounting for Cost of Goods Sold Copyright © 2019 by reecejr1 and Reece B. Morrel, Jr. JD MBA CPA CGMA AEP®. All Rights Reserved.

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