How to Call the IRS Bluff con't...

Bluff #2:  You must disclose every aspect of your financial life. 

It’s up to you to protect yourself. Your life is personal. Do you really want the IRS auditor to know you buy a 6-pack a day or what you spend on personal hygiene? You will only have the rights you demand.

Here’s the way to call the bluff!

Bring to the audit only records that were specifically requested. This keeps unrelated items that might be questioned out of the auditor's sight. It will stop a fishing expedition with the agent rummaging through your shoebox of receipts. 

If the auditor asks for any further records, have him request them in writing. This eliminates any misunderstandings and creates a paper trail that may be valuable in future proceedings.

Organize records thoroughly before presenting them to the IRS. Auditors direct their efforts to the areas that seem most likely to be productive, and sloppy record keeping may be taken by an auditor as a sign that a closer examination of the books could be rewarding.

Bluff #3:  You cannot claim a deduction without a receipt or canceled check.

Many IRS auditors imply that you must have a receipt or canceled check to claim a deduction. This is NOT completely true!

This is true for most deductions on your personal return but is NOT true for business deductions. The IRS allows you to keep detailed records instead of receipts for allowable business deductions that are $75 or less.

The IRS suggests you keep a journal. You should record at the least, the following information:

1. Who was paid
2. How much was paid
3. How you paid (credit card, cash, check number)
4. The date of the transaction
5. What the expense was for (office supplies, equipment, utilities, rent, entertainment, tips, cab fare, copies)
6. Names of any other people involved

Affidavits and reconstructed records are also useful when used to claim deductions where acceptable records are unavailable.

Bluff #4:  They tell you when and where and you say, "Aye, Aye Sir!"

Although the official government stats show the IRS audits about 1.6% of all returns, it is important to note that this figure includes what the IRS calls correspondence audits. These correspondence audits make up more than half of all audits that are conducted in a given year. Correspondence audits are handled completely by mail. In most cases, they involve only one or a few Items. You receive a request for more information and you mail in proof for the item they have questioned. 

Examples: The IRS asks that you send a copy of the receipt you obtained for a charitable contribution or a copy of an account statement that verifies a capital gain or loss you reported on your return.

Often the IRS will send you an audit letter giving dates and times. You have the right to ask the IRS to reschedule the audit to accommodate you.

A postponement may be sought to get more time to pull together records or resolve a scheduling conflict. The IRS usually is reasonable about granting postponements as long as it does not suspect the taxpayer of engaging in a strategy of delay.

A change of location for an office audit can be requested if you have moved since filing your return and now live far away from the IRS office that sent the audit notice. The audit may be transferred to an IRS office nearer you.

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