The Period of Income (POI) is a process that should be performed after seeing a large variance between two or more periods of income. It is a financial forensic analysis that will show you whether a person is stealing from an employer or if there are other financial discrepancies.
The Period of Income (POI) is a critical concept in an income tax investigation. It represents the time period in which you receive your income and is generally the time period that is under examination. To determine the POI, you must first understand the concept of the Period of Assessment (POA) which is defined as the period of time over which income is assessed for income tax purposes. The period of assessment normally matches the income tax year, which is defined under the income tax legislation of the various provinces and territories as being from January 1 of a year to December 31 of the same year. The POI begins on January 1st and ends on December 31st.
Period of Income for Discrepancy Analysis
The first step in reviewing an income discrepancy is to manage the POI (Period of Income). The Period of Income determined by the discrepancy report emerges near the top of the report, under the description “Period of Income for Discrepancy Analysis.”
The POI is the time period in which the discrepancy occurred. The system automatically selects POIs from the same time period as the POI of the transaction that produced the discrepancy.
As we know, the period of income (POI) is the time period between the dates on which income is received and processed by the revenue service. The POI is used by the IRS to determine if the taxpayer is underreporting income. This becomes evident when the amount of actual income is compared with the amount reported. If the actual income received during the POI is significantly different from the reported income, then an income discrepancy exists. If the taxpayer has not provided adequate explanations for the discrepancy, then the income tax due will be increased to equal the amount of actual income.
Period of Income and False Positives on the Income Discrepancy Report
The Income Discrepancy Report (IDR) is a report generated by the CP System that compares the client’s reported income to the income that was available in the voucher system. The IDR is generated once the client is in the voucher program. The purpose of the IDR is to identify clients whose reported income does not match the income available in the voucher system. But, this income is not incorporated on a 50058. So, this is a situation “invalid” discrepancies may occur.
To know more about Period of Income (POI) and the Enterprise and Income Verification (EIV) System, attend the Compliance Prime webinar.
