Audit Adjustments Killer Advice Dealing With IRS Auditor

Audit Adjustments On Your Audit Report Form 4549

Your audit report often doesn’t contain the explanations for adjustments that they are supposed to. Most of it is boiler plate information that spits out of the  IRS computer. You need good explanations for any audit adjustments.

Adjustments To Income From Bank Records

IRS  Auditors have told me that they are just taking all the deposits they find on your bank accounts and are counting them as income. We have found that to be true in the audits we are involved in. Make sure you account for all deposits, even if you have to get notarized statements from the people who gave it to you. Don’t let yourself be a victim of paying taxes on deposits you know are not income. Most of our clients don’t.

Adjustments From Mileage Records

Did you know that you can create a mileage log after you receive your notice of audit? Did you know that auditors like to take only a percentage of what you claim, even though what you claim is reasonable? Don’t let it happen. Fight for your vehicle deductions. Some are classified as employee business expenses, some are not. For example, if you are self employed and claim mileage commuting from one job to another, it may have to go on Sch C. This way you get the deduction even if you don’t itemize, and it also reduces self employment taxes.

Audit Adjustments For Personal Use Items

Things like computers, cell phones, cars, etc. that can be for both personal or business use are looked at more closely. Auditors want you to prove the percentage of business use. It’s not enough to show that you paid for it from your business account and have the invoice. You must document your business use and also show (for the most part) that it was ordinary and necessary to incur that level of expense in your business.

Additional Penalties For Substantial Understatement

Auditors have told us that they are not allowed to remove those additional penalties. We found in practice, that if we look up the reasons on the IRS Penalty Handbook, and have a good enough reason, and trade it for the taxpayer signing the audit report, then we can get it removed mostly all the time. Let’s face it, maybe a taxpayer loses a deduction because the auditor doesn’t accept their receipts, maybe they are missing some receipts. That doesn’t mean that they were negligent in declaring the information on their tax return. It doesn’t mean they intentionally disregarded the rules. It doesn’t mean they did anything wrong! Now its your job to convince the auditor. We can do it for you if you’d like!