IRS Audit

IRS Audit

If you received an IRS audit letter, you should start learning more about audits and the IRS examination process. An IRS audit is when the IRS requests that you contact them to provide proof of deductions, income, or to consider the treatment of various items on your tax returns. Many people mistakenly think that all they need to do is to bring their receipts and other information to the revenue agent as verification.

What they don’t realize is that the IRS examiner is trained to ask probing questions, and to come up with reasons why your deductions are not acceptable. In fact, the professional community has complained that in an IRS audit they often do not distinguish between the questions asked in a general audit vs. a criminal investigation. You will be asked financial status questions focusing on your lifestyle, standard of living, and other elements unrelated to the items on your tax return. This is one reason why even if you have receipts, and feel that your return was prepared correctly, you could still be in jeopardy.

The tax code is written in a manner that leaves a lot open to interpretation. You must meet ‘purpose’ tests, and other tests that even many accountants take for granted. I have personally experienced an IRS audit person denying deductions for my clients when I felt we had enough evidence to justify our position! So basically, any time the IRS requires you to prove something to them, you need the help of an experienced professional who knows what the law is and how to argue your position. The ability to represent your position and at the same time maintain a good rapport with an IRS audit person is essential. Otherwise the IRS audit person can and will make adjustments against you.

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