So my 2015 (the year we started rehabbing properties full time) was audited. I made the mistake of not using a CPA and she messed up my tax return huge. Long story short I got a $14k refund. During the first quarter of 2015 I had a full-time job in IT I paid $14k in taxes. With all of the deductions we were told we could take at our guru class we were able to show no income and I got all of that money back.
I found a CPA before I was told I was being audited and we planned to file an amended return because as I suspected the original accountant did everything all wrong. Unfortunately we weren't quick enough. We removed all of the deductions that I couldn't actually take because they were related to the property I sold in 2016. Additionally we removed the $57k in guru courses I was told could be deducted. The result was me owing around $11k. Fine, not awesome but not the end of the world.
Then I got a letter with the result of my audit and it stated I owed the IRS $25k ($1,400 in interest, $4,500 in fees and the rest is tax liability). Turns out the IRS dude decided that none of the schedule C deductions were allowed because I was not a 'dealer'. Even though I had bought and sold 10+ properties over the last 15 years it didn't make me official. We called the IRS guy and argued with him and he said he wanted more explanation and documents of a few things. We sent the requested info and I just got the revised audit result. It actually got worse and I apparently owe almost $29k. I just sent a note to my CPA and am waiting to hear back. Schedule C was again not allowed and I'm not sure what the additional tax is.
I don't know what to do. Do I need a new CPA? Do I need to fight this as my CPA said we could do. Do I just pay it and move on? Chalk it up to yet another VERY expensive lesson learned. I just can't believe how it just keeps growing.
