Scenario: Imagine that you are a CPA working for an accounting firm. Your client is a Fortune 500 public company that has revenues exceeding $10 billion. It is a fast-growing company that has engaged your firm to handle all tax compliance and consulting. The client has recently received notification from the IRS, and they have determined that they will be under audit for the prior tax year. The client contacts you to help them through this process. While meeting with the IRS to understand what they need for their audit, you provided the IRS with your client's trial balances, recent tax return work papers, and the tax returns themselves. After further review of those documents, the IRS provided your client with a Notice of Proposed Adjustment (NOPA) related to per diem expenses that the client has been providing to their employees when they travel for business. The per diems were for the combined lodging and meal expenses. The IRS is recommending that these per diems are nondeductible at a rate of 50 percent. The adjustment they have proposed is $5 million. While discussing the issue with your client, you learn that they have accounted for per diem expenses the same way for the past several years in their tax returns. You estimate that the fees associated with your services will be $250,000. This fee includes defending your client before the IRS, drafting a response plan, preparing a NOPA response, and defending your client through an appeal.

Prompt: In this section, you will introduce your client to their current taxation situation and explain the issue that they are facing.

Summarize what has occurred so far in the IRS audit process. What has the IRS requested from your client, and what have you provided on their behalf in response?

Provide a detailed explanation of your client's current situation, including what the IRS is trying to adjust on their prior-year tax return and how much money the IRS is requesting in adjustments.

Explain why the IRS is trying to make this adjustment, supported by relevant IRS deduction rules.

State how much time your client has to respond to the IRS's proposed adjustment, supported by information found on the NOPA.

Your memo must be submitted as a 1- to 2-page Microsoft Word document with double spacing, 12-point Times New Roman font, and one-inch margins.