Comments on: How to Survive a Tax Audit

By: Matt

Matt — Fri, 30 Sep 2011 00:23:14 +0000

I have received a correspondence audit requesting mileage deductions and business deductions. I looked at the return and found that my tax guy put deductions from my previous year when I had a different job. It seems like he pulled my info from the previous year and he also put down that I drove 52k miles. Obviously I just signed the return and barely skimmed through it. My question is should i tell the auditor about the mistakes or just send the reciepts I have and let them adjust the return. I know I’m going to have to pay either way. I received 2k back on the return in question.

By: Jim

Jim — Wed, 13 Jul 2011 12:31:42 +0000

I’m afraid I don’t know who you can complain to.

By: Jodie

Jodie — Wed, 13 Jul 2011 03:47:28 +0000

Jim, we have been audited twice by the IRS in two years. Once for our 2007 return and again for 2009. We have a family of four and make less than $60,000 per year. They claim we owe aver $2000 for both years although we paid the 2007 fees. Now they want another $900. We are barely getting by as is and we were devastated to see yet another audit notice in the mail last week. How is it possible that the IRS can continue to harass us when we have so little in the first place and is there any way we can file a complaint?

By: lori

lori — Sun, 20 Mar 2011 21:19:57 +0000

what happens if you get audited and you lost all your paperwork in a move? we moved 6 months ago and lost alot several boxes in a move, one with all our paperwork in it…how can we explain most of the paperwork ect wit no back up?

By: Laura Canales CPA

Laura Canales CPA — Fri, 02 Apr 2010 01:43:16 +0000

Technically, everyone is in “danger” of being audited in one of the random cases. If you have no unreported income and have a very simple return (no itemised deductions) you would have a very simple audit. I had one of these with a client and it took all of 20 minutes, and that’s even with the Q&A that goes on for 15 minutes at the beginning.

By: Laura Canales CPA

Laura Canales CPA — Fri, 02 Apr 2010 01:39:29 +0000

Exactly right – but sometimes you’re not cheating (that’s on purpose and it’s fraud), just forgot something, or put in the work number somewhere – honest mistake.

By: Laura Canales CPA

Laura Canales CPA — Fri, 02 Apr 2010 01:38:03 +0000

Oh that’s the worst thing you can do! Don’t bring everything…it’s like letting the police in the front door on all those shows you see on TV, and as soon as they’re in they can look at any room in your house!

By: Laura Canales CPA

Laura Canales CPA — Fri, 02 Apr 2010 01:35:47 +0000

I also know another CPA who doesn’t do taxes – she does internal control and fraud investigation consulting. But she still gets questions, too!

By: Laura Canales CPA

Laura Canales CPA — Fri, 02 Apr 2010 01:34:03 +0000

You may think you can’t justify it, but when you get audited later, you will spend much more getting help than if you planned properly in the first place. If you think you can’t spend an extra $100-200 now what if you have to spend an extra $1,000-$2,000 later to get it fixed? Tax audits can be expensive to get the right help, especially if you don’t want to deal with the IRS yourself (and seriously, I don’t recommend this in most cases). Think of it like insurance – you pay, say, $200 a month for car insurance, but you are a safe driver, never get in an accident, but think of how much you would pay later if you wrecked your car and didn’t have insurance to pay to fix it. You could be left with not only a repair bill, but if the car is totaled, you still finish making the payments and then have to get another car.

By: Laura Canales CPA

Laura Canales CPA — Fri, 02 Apr 2010 01:25:56 +0000

Thank you, Chris. I think a CPA is a great person to have that you can contact to ask questions throughout the year – use us for tax planning as well as tax prep! Almost everything you do that has a dollar amount attached may have tax consequenses, from paying for childcare to buying a car, to opening a business.

By: Laura Canales CPA

Laura Canales CPA — Fri, 02 Apr 2010 00:57:18 +0000

The difference between underreporting and fraud is honest mistake (you didn’t get all of your 1099s, your W-2 was incorrect, etc.) and Al Capone – who was convicted and jailed, not for mob activities but for tax evasion, for not reporting all of his income from illegal activities. Purposely not including income from all worldwide activities (like the gambling winnings from that cruise to Jamaica) is fraud. Reporting the $1,437 you won at roulette and not the $$.50 you got in the slot machine is fraud. Not reporting the $.50 because you forgot is underreporting. The difference is not in the tax you have to pay – that is the same. The difference is in the intent – and for fraud there are penalties and possibly jail time (like the aforementioned Mr. Capone).

Overreporting expenses is treated the same way – if it’s willful and you know when reporting it it’s incorrect, it’s fraud. If you calculated something incorrectly, it’s underreporting of net taxable income.

It’s all about intent for the IRS, not the fact that you did it, but why.

By: Laura Canales CPA

Laura Canales CPA — Fri, 02 Apr 2010 00:45:45 +0000

You don’t need anything from the time you were claimed as a dependent on your parents’ returns. We “experts” recommend 7 years because of the reasons cited in Jim’s reply. The IRS will generally leave you alone if you have filed correctly, and your filings match the corroborating docs they receive. But they do random audits as well – but the percentage of audits to returns filed is extremely low.

By: Strebkr

Strebkr — Mon, 15 Mar 2010 16:32:58 +0000

and make sure you get a CPA who does taxes. I am a CPA, but I dont do taxes. I do my own taxes and I whine and complain as much as everyone else out there. I get all sorts of questions from friends and family about their taxes because they think I’m an expert. I know all the basics and maybe a bit more, and I know the theory behind all sorts of tax things, but when it comes to filling out the forms I can get lost quickly.

By: Strebkr

Strebkr — Mon, 15 Mar 2010 16:30:47 +0000

1.1 million @ 5.5% interest is over 60k in interest.

Interesting, I didnt know there was a limit on this. Not that I’ll ever get near that, but interesting to know.

By: Strebkr

Strebkr — Mon, 15 Mar 2010 16:28:48 +0000

…and if you are not honest??? HAHA. I must have missed the box on my tax form asking if I was honest.

Anyways, whats the difference between fraud and underreporting income. Arn’t they one and the same? And whats the difference between underreporting income and over reporting expenses? They both lower your tax liability. I wonder why the IRS cares about one of them more then the other.