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The Easiest Way To Survive An IRS Audit Is To Get Ready In Advance

IRS audit rates are historically low, according to the latest data, but that’s little consolation if your return is among those selected to be examined. But with proper preparation and planning, you should fare well.

In fiscal year 2019, the IRS audited approximately 0.4% of individuals. Businesses, large corporations and high-income individuals are more likely to be audited but, overall, all types of audits are being conducted less frequently than they were a decade ago.

There’s no 100% guarantee that you won’t be picked for an audit, because some tax returns are chosen randomly. However, the best way to survive an IRS audit is to prepare for one in advance. On an ongoing basis you should systematically maintain documentation — invoices, bills, cancelled checks, receipts, or other proof — for all items to be reported on your tax returns. Keep all your records in one place. And it helps to know what might catch the attention of the IRS.

Audit hot spots

Certain types of tax-return entries are known to the IRS to involve inaccuracies so they may lead to an audit. Here are a few examples:

Significant inconsistencies between tax returns filed in the past […]

By Linkenheimer LLP|2020-10-07T01:37:10+00:00October 7th, 2020|audit, business|0 Comments

Poor Recordkeeping Hurts Taxpayers: Problems and Prevention

Every year a few taxpayers go to court hoping for a better outcome than the one offered by the IRS. Usually, they lose due to poor records, not meeting all requirements for particular deductions, or inadequately separating business from personal expenditures. This article examines a few 2015 cases involving these issues and makes suggestions for practitioners to remind clients that they need timely records and should only report allowable deductions. – See more at: http://www.thetaxadviser.com/newsletters/2015/oct/poor-tax-recordkeeping-hurts-taxpayers.html#sthash.Do84PZol

By Linkenheimer LLP|2020-09-03T20:05:22+00:00November 3rd, 2015|irs|0 Comments

Noncash Charitable Contributions: Documentation

To Our Clients and Friends:

As we approach the end of the year, a recent Tax Court case is a good reminder of what it takes to support a deduction for noncash charitable contributions that perhaps you’ve already given this year or plan to donate in the coming weeks.

The taxpayer in the case claimed a deduction of almost $28,000 for three separate noncash donations to a charitable organization. The donated items consisted of clothes, household goods and furniture, and various electronics, including computers and a printer. Because of the size of the donations, he was subject to several documentation requirements related to substantiating his donations. These included:

A need to obtain a written acknowledgment from the charity (required any time cash or noncash donations are $250 or more) describing what was donated and when, and stating either that no goods or services were rendered in return for the donation or describing and valuing what the charity provided in return. The acknowledgment must be obtained by the time the tax return for the year of the donation is filed or due, whichever comes first.
A requirement to maintain documentation for noncash donations of the same or similar items […]

By Linkenheimer LLP|2020-09-03T20:05:41+00:00December 2nd, 2014|charity, contributions|0 Comments