If you have ever received one of those dreaded IRS Audit Documentation requests, you'll know how trepidating it can be. It is common to find many taxpayers not be able to produce the documentation required to back up some of their claims in their tax returns. Then there are those who knowingly make inaccurate claims on their tax returns without proper documents to back them up. If you have received lots of IRS audit documentation requests, don't panic. Here is what you can do.

Firstly, make it a habit to save every shred of proof of purchase or receipt. When you bought that snow blower, you may not have realized that it could serve as a tax write-off, but now that you do, you need that receipt. Sure, doing this would be tedious but it's necessary. Saving things is even more important if you work from home. Everything from your water bill to your house rental can be tax deductible and in most cases, the IRS will allow it but you have to have documents.

Secondly, if necessary you could request for a time extension. You have the right to ask for more time to gather the IRS audit documentation requests but there is a limit to this before you have to produce whatever documents the IRS requires of you. If you have a box of paperwork at your summer home and you need to go and get it, do that, but don't cancel a meeting with an IRS agent to do so. You could face heavy fines and even a reproof from a judge.

The next thing you can do is to obtain duplicate copies of your proof of purchase. They are kept on record for tax purposes of the store and all you will need is an approximate date when you made your purchase and the credit card or debit card that the transaction was made with. The computers at the store can almost certainly cross-reference the purchase and print out a receipt for you. You would likely find this technology from most major establishments but maybe not a small single unit retail shop.

Finally, when it comes to the IRS, honesty is always the best policy. If some of your deductions were false or slightly adjusted figures, be upfront about it otherwise when it is discovered in the audit process it would be worse for you. The worst that can happen is that the tax cut you wanted is declined.

Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for over a decade. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.

All about IRS Audit Documentation Requests is a post from: IRS Tax Problem Solver Blog - IRS Help

The IRS Audit Process can start out in a variety of ways but usually it starts out with a letter. A  letter saying "bring all your books and records down for review by the IRS." Few letters strike fear into the hearts of Americans as an IRS Audit Process letter. But with some advance information, you can be better prepared after you receive such a letter. You'll have a better understanding of the entire IRS audit process including Notices of Deficiency, Tax Court, correspondence audits, field audits, office audits and more. This video describes the different types of IRS Audit and what to do when faced with dealing with any of them.

The IRS Audit Process is a post from: IRS Tax Problem Solver Blog - IRS Help

Hello, I'm Darrin T. Mish and I'm a tax attorney with an international tax practice based in Tampa, Florida. Almost every day on my blog and in my website at getirshelp.com, we get comments and emails from people who relate to us their horror stories with the IRS, so I thought I would read one here today.

It goes like this. "My fiance and I were living together in North Carolina. It was well after the tax season had ended and we had just moved out of my parents' house. The lived in Illinois. My father called me up to let me know there was a letter from the IRS. They claimed we did not mail all the proper information that they needed.

They sent out a form we needed to fill out and mail back. My parents mailed this form to us by express mail. After filling out the form we discovered that they were claiming we owed $75. Now $75 doesn't seem like a lot to many people, but we were two young adults surviving off of two minimum wage part-time jobs. We then contacted a number listed on the letter.

They were not very helpful and a little rude. We decided it was best to just mail them a check and fill out the form. A few months passed another letter came. We thought they were asking the same thing again. We tried to call again, but my phone disconnected due to poor signal.

Remembering we had paid for the first check with our bank account which was our still active one, I went through bank statements that showed our $75 check had been cashed and we were finally able to call the IRS with some proof. After being put on hold for a long time, we were finally able to get the matter resolved.

Six weeks later our second check of $75 was refunded to us. WE celebrated that night with a trip to TGI Friday's. I felt very relieved to have the matter resolved but angered that it ever happened. I expected the IRS to be a little bit more organized."

That's an interesting point in that, I think, it is generally speaking a very bad idea to deal with the IRS over the telephone. I think a better course of action is to respond to correspondence by US Certified Mail Return Receipt Requested.

In this case, remember their parents had express mailed the IRS letter to them, incurring the cost of at least 15 additional dollars when their parents probably could have scanned, faxed or emailed to them and then they could have responded to the IRS by certified mail with a check if they felt they need to.

The fact that they got duplicate correspondence, that indicated they owed $75 again, is not all that surprising. You see the IRS is a vast organization with over one million employees employed by the Treasury Service, on behalf of the Internal Revenue Service. So it is important to know this is a very large bureaucratic, tangled, byzantian maze of bureaucracy.

So the fact that the computer spit out two letters is not, particularly surprising to me. Just keep in mind that IRS problems can take a while to solve. It takes a lot longer than you would think, because most likely a human being is not looking at your correspondence and is not reacting appropriately.

I think that this story is particularly interesting in light of Timothy Geithner the new Treasury Secretary's revelations before Congress that he had actually had made some mistakes in paying his tax obligations too.

Now if Timothy Geithner can be nominated and confirmed as a Treasury Secretary to the United States and this poor couple owed $75 to the IRS they wouldn't let up on, I just think that's an interesting dichotomy. Let me know what you think and go ahead and comment below.

This is Darrin T. Mish. If you would like to see additional videos or additional information about IRS help and IRS problems, I invite you to visit our website at getirshelp.com.

Couple Hounded by IRS over $75 is a post from: IRS Tax Problem Solver Blog - IRS Help

Taking a tax deduction for your new iPhone 3G (or other cell phone) and the monthly service bill that accompanies it may be a bit more complicated than you think, even if it is used primarily (or exclusively) for business purposes. It's complicated because cell phones are considered "listed property" by the Internal Revenue Service and have been since 1989. "Listed property" includes items obtained for use in a business but designated by the Internal Revenue Code as lending themselves easily to personal use. The designation of an item as listed property has implications for depreciation deductions taken by the business and the computation of net income if there is an ongoing expense linked to the listed property. In the case of your new iPhone 3G, you have the electronic device (or handset) and the monthly service bill (expense) that accompanies its use.

Claiming any deduction for your iPhone 3G will be dependent on the circumstances. If you are in business for yourself, your new iPhone 3G must be both an ordinary and necessary business expense. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary. If you are an employee and use your iPhone 3G to perform your job, it must be both for the convenience of your employer and required as a condition of your employment. For the convenience of your employer means that your use of the iPhone 3G is for a substantial business reason of your employer. Required as a condition of your employment means that you cannot properly perform your duties without your iPhone 3G.

With the mobility of today's workforce and the amount of travel some jobs require, it's not necessarily difficult to meet these conditions. However, just meeting these conditions is not enough because remember … cell phones are designated as "listed property" by the IRS. The use of "listed property" for business purposes needs to be substantiated. In the case of your new iPhone 3G that means making sure you receive an itemized monthly bill, "itemized" means one that lists every phone call made and received, not just the "services" you pay for. If your cell phone service provider cannot provide you with a list of your monthly phone calls you will need to keep a log. Regardless of whether you get an itemized bill or keep a log the business purpose of each call must be noted. This information is used to determine the percentage of business use for your iPhone 3G. Simply, claiming 100% business use won't suffice.

In depreciating your iPhone 3G the depreciation method you use will depend on whether you meet the more-than-50%-use test. You meet this test if you
use your iPhone 3G more than 50% for business purposes. If you meet this test, you can claim accelerated depreciation under the General Depreciation System (GDS). In addition, you may be able to take the section 179 deduction for the year you place your iPhone 3G in service. If you do not meet the more-than-50%-use test, you will be limited to the straight line method of depreciation under the Alternative Depreciation System (ADS). Additionally, you will not be able to claim the section 179 deduction for your iPhone 3G. The percentage of your monthly iPhone 3G service bill attributable to business purpose is deductible against business income. In many cases this percentage could vary each month, detailed records will substantiated the annualized total you claim, making your new iPhone 3G tax deductible.

In summary to claim an income tax deduction for your new iPhone 3G you need to begin by documenting your business use, either by obtaining an itemized bill or keeping a log yourself. Because it's likely the business versus personal usage will vary from month to month throughout the year, the percentage of your bill deductible each month will be limited to that month's business use percentage. When you are finalizing your income tax return at the end of the year, you will simply average each monthly business use percentage for an annualized percentage of business use in determining what depreciation options will be available to you. If your average business use is greater than 50% you will have more depreciation options for your iPhone 3G, including taking a section 179 deduction for the year it was placed in service. It's recommended that you have a tax professional look at the specifics of your situation before claiming any deductions. Remember, with listed property like your iPhone 3G, documentation supporting your claim of business use, is key.

Is Your New iPhone 3G Tax Deductible? is a post from: IRS Tax Problem Solver Blog - IRS Help

If you've received a Notice of Deficiency from the IRS, the short answer to the question is hire a tax attorney immediately. A Notice of Deficiency results after the IRS has examined (audited) your return and determined you owe additional taxes. The Notice of Deficiency allows you to go to the Tax Court and tells you the procedure to follow. You have a limited amount of time to respond before forfeiting your rights. If you don't respond within the prescribed time, the IRS will send you a bill for the additional tax due. You have 90 days from the date this notice is mailed to you to file a petition with the Tax Court (or 150 days if the notice is addressed to you outside the United States). The last date to file your petition will be entered on the notice of deficiency issued to you by the IRS. If you discuss your case with the IRS during the 90-day period (150-day period), the discussion will not extend the period in which you may file a petition with the Tax Court. The court will schedule your case for trial at a location convenient to you. You may represent yourself before the Tax Court, or you may be represented by anyone permitted to practice before that court.

A notice of deficiency must be sent by registered or certified mail to the taxpayer's last know address. As long as these requirements are met, the notice is adequate even in cases when the taxpayer has passed away, or is legally disabled. If the deficiency results from a joint return, notice to only one spouse is enough unless the IRS has been notified that separate residences have been established. Once the IRS establishes that a notice of deficiency was mailed by registered or certified mail to the taxpayer's last known address, case law supports the stance that the IRS has fulfilled its delivery requirement, even if the notice is never received by or signed for by the taxpayer. Additionally, if the taxpayer receives the notice at an address other than the last known address on file with the IRS in time to file a tax court petition, the courts support the IRS as having fulfilled the delivery requirement. This is true even if the notice was not sent by certified or registered mail, as long as the IRS establishes the taxpayer received the notice.
If the notice of deficiency is not sent to the taxpayer's last known address, but the taxpayer eventually receives the notice, the taxpayer has three choices: 1. a petition can be filed with the tax court; 2. the taxpayer can pay the tax claimed on the notice and then file for a refund; or 3. the taxpayer can file for an injunction in federal district court. If a petition with the Tax Court is filed, the Court will dismiss the case if one of two things can be established: either that the notice of deficiency complied with the law and the IRS claim is valid or that the notice did not comply with the law because it was sent to the wrong address. If the case is dismissed because the IRS failed to comply with the law, the assessment claimed on the notice is ruled invalid. The IRS must then start over by issuing another notice of deficiency. Additionally, it's important to note that an invalid notice of deficiency does not suspend the statute of limitations on the tax assessment claimed on the notice.

I Received a Notice of Deficiency from the IRS, What Do I Do? is a post from: IRS Tax Problem Solver Blog - IRS Help

If you are a taxpayer with a subchapter S corporation, partnership or a disregarded entity for taxation purposes watch out. The IRS intends to look more closely at entities that pass profits through to the owners who then report the profit or loss their personal tax returns. In these cases the return filed by the entity is purely "informational," showing only income, expenses and profit or loss. The entity is not required to pay taxes on any profit because the profit is then passed on to the entities partners or shareholders, who in turn pay any tax liability associated with the entity on their personal returns. A principal component in the reasoning behind more aggressive audits on these entities involves the question of whether or not, and if so to what degree should those profits be classified as a salary when the owners are self-employed.

The IRS views this as an opportunity to increase the collection of Social Security and Medicare taxes. In the past small business owners have been able to use these entities as tax savings tools by minimizing their personal salaries and classifying the remaining profits as distributions, thereby minimizing the amount of Social Security and Medicare taxes the had to pay. In recent years the IRS has taken the position that these type of entities must pay their owner/employees a salary corresponding with the fair market value of their service to the company. The Internal Revenue Code and the Treasury Regulations hold that as a matter of law officers and shareholders of these small businesses that perform services for the entities in question are employees. As employees they must be paid appropriately and their wages taxed accordingly, Social Security and Medicare taxes being withheld. U.S. Tax Courts have upheld the IRS's position on this matter and the underlying law.

Auditing operations at the IRS have been geared up to apply more concentrated focus on entities possessing a character that embodies potential abuse. Average CEO and corporate officer pay is in the high six and seven figures annually. It's going to be increasingly more difficult for a small business whose identity is closely linked with it's owner/employees (often just one or two individuals) to claim a small salary is fair market value when the company is showing sizable profits for the year. In many instances it will be easy for the IRS to make the case that the owner/employee IS the company, and therefore most if not all profit should be attributable to the services the owner/employee provides. With IRS collection efforts of recent years being focused toward payroll taxes, proper withholding and timely estimated payments, the additional burden placed on small business owners in the future as a result of this newly concentrated focus, is clearly foreseeable.

AUDIT OPERATIONS AT THE IRS INCREASINGLY TARGET SMALL BUSINESSES is a post from: IRS Tax Problem Solver Blog - IRS Help

IRS audits can be worrisome.  If you have received a notice that you are being audited, do not panic.  You may think that your IRS Problems are going to escalate because of the audit, but if you handle the situation right, everything will be fine.

First of all, read the notice and make sure you understand what the IRS wants from you.  You will find the information regarding the year they are auditing, what kind of audit they are performing, and the documentation necessary.  You will be given a deadline for a response, usually 30 days.  Do not set the notice aside and forget about it.  Respond immediately and start getting organized.

The IRS conducts audits in a number of ways.  The two most common types of audits are correspondence and face-to-face.

Correspondence Audit

The IRS uses the mail to conduct a correspondence audit.  More often than not, these audits are used to make corrections on your tax return.  It is important that you respond as soon as possible.  If the correction means that you owe taxes, any delay will add penalties and interest to what you owe.  Read the notice carefully, gather and copy any necessary documentation, and respond by the deadline indicated.  Keep copies of all your correspondence with the IRS.  Be aware that if you disagree with the stated corrections, you do have a right to appeal.  Put all of this information in writing along with the necessary documentation and mail it with your response.

Face-to-Face Audit

A face-to-face audit requires a meeting between you and a revenue agent or tax auditor.  The notice you receive will give you a place and time for the audit or you will be requested to call to set up a meeting.  Steps to follow when preparing for and attending a face-to-face audit include:

•    Do not set the notice aside.  You usually need to respond within 30 days.
•    Read and re-read the notice.  Understand what is expected of you and what documentation you will be required to provide.
•    Get organized.  Gather your documents and be prepared to prove the information on your tax return is correct.  If there are any missing records, request copies from the IRS now.  If you are organized and ready for the auditor’s questions, the audit will run smoothly and the auditor’s job will be easier.  This should work in your favor.
•    Bring only the requested documentation.  Do not bring any documents that were not requested.  If you are asked about an item and the documentation is at home, it will probably be dropped.
•    Check your attitude.  Do not come to the audit ready for a fight.  Be polite and courteous.
•    Provide copies of the documentation.  Do not give the IRS your originals.
•    Answer questions with “yes” and “no”.  Small talk can actually provide the auditor with valuable information.  Do not give them a reason to expand the audit.
•    Understand your rights.  Get informed about the audit process, be aware that you can disagree with the IRS’s findings, and know that you have the right to request an appeal.  It is also important to note that you have the right to take a tax professional with you to the audit.

If your IRS Problem is concerning an audit and you require more information and direction, our knowledgeable staff will be able to assist you.  Get organized and get out from under your IRS Problems with our help.  Contact us today.

Problems with IRS Audits is a post from: IRS Tax Problem Solver Blog - IRS Help

IRS audits can be worrisome.  If you have received a notice that you are being audited, do not panic.  You may think that your IRS Problems are going to escalate because of the audit, but if you handle the situation right, everything will be fine.  

First of all, read the notice and make sure you understand what the IRS wants from you.  You will find the information regarding the year they are auditing, what kind of audit they are performing, and the documentation necessary.  You will be given a deadline for a response, usually 30 days.  Do not set the notice aside and forget about it.  Respond immediately and start getting organized.

The IRS conducts audits in a number of ways.  The two most common types of audits are correspondence and face-to-face.  

Correspondence Audit

The IRS uses the mail to conduct a correspondence audit.  More often than not, these audits are used to make corrections on your tax return.  It is important that you respond as soon as possible.  If the correction means that you owe taxes, any delay will add penalties and interest to what you owe.  Read the notice carefully, gather and copy any necessary documentation, and respond by the deadline indicated.  Keep copies of all your correspondence with the IRS.  Be aware that if you disagree with the stated corrections, you do have a right to appeal.  Put all of this information in writing along with the necessary documentation and mail it with your response.

Face-to-Face Audit

A face-to-face audit requires a meeting between you and a revenue agent or tax auditor.  The notice you receive will give you a place and time for the audit or you will be requested to call to set up a meeting.  Steps to follow when preparing for and attending a face-to-face audit include:

•    Do not set the notice aside.  You usually need to respond within 30 days.  

•    Read and re-read the notice.  Understand what is expected of you and what documentation you will be required to provide.  

•    Get organized.  Gather your documents and be prepared to prove the information on your tax return is correct.  If there are any missing records, request copies from the IRS now.  If you are organized and ready for the auditor’s questions, the audit will run smoothly and the auditor’s job will be easier.  This should work in your favor.

•    Bring only the requested documentation.  Do not bring any documents that were not requested.  If you are asked about an item and the documentation is at home, it will probably be dropped.

•    Check your attitude.  Do not come to the audit ready for a fight.  Be polite and courteous.  

•    Provide copies of the documentation.  Do not give the IRS your originals.

•    Answer questions with “yes” and “no”.  Small talk can actually provide the auditor with valuable information.  Do not give them a reason to expand the audit.      

•    Understand your rights.  Get informed about the audit process, be aware that you can disagree with the IRS’s findings, and know that you have the right to request an appeal.  It is also important to note that you have the right to take a tax professional with you to the audit.

If your IRS Problem is concerning an audit and you require more information and direction, our knowledgeable staff will be able to assist you.  Get organized and get out from under your IRS Problems with our help.  Contact us today.  

Problems with IRS Audits? is a post from: IRS Tax Problem Solver Blog - IRS Help

The IRS is auditing more people these days and concentrating less on businesses.  The percentage of individual IRS audits has risen 14 percent in the last couple of years, and that trend looks to be continuing.  If you need IRS help with an audit looming before you, contact one of our professionals for advice.

What exactly is an audit?  An audit is a review of your filed tax return by the IRS (Internal Revenue Service).  The review is to determine the accuracy of your return.  However, here is an important point to remember:  You, the taxpayer, have the burden of proof on you, to prove that your tax return is accurate and true to the best of your knowledge.  This means that if the IRS were to question a deduction, for example, on your return, you have to prove it is correct.  The IRS does not have to disprove the deduction; you have to prove that it is precise and truthful as you reported it on your tax return.  If you cannot prove the deduction to the IRS, it may be prohibited for your use.

Who are the most likely individuals to be audited?  People who have unusually large deductions on their income tax returns; people who operate cash businesses; and certain professionals who garner the attention of the IRS are more at risk for audits than others.

If you have a possible IRS problem with an audit, or think you might have an IRS problem with an audit, and need IRS help, contact our friendly and professional staff and let us provide you with that assistance.

The IRS seems to have shifted its focus from businesses and corporations to the individual, ordinary, everyday citizen to scrutinize their income tax returns for flaws, errors, and fraudulent activities.  So, the best plan would be to make sure that all your “i’s” are dotted and “t’s” are crossed, as the saying goes.

Audits and enforcement principles took a back seat to customer service in the 1990s as that was the focus at that time.  Times are changing and the focus has now shifted back to auditing individual income tax returns.

It is more time-consuming and costly for the IRS to audit corporate returns and tax shelters.  Tax shelters are more involved and intricate to untangle.  Another factor is that money allocated to the IRS for resources and personnel has declined.  The IRS has had to shift money from enforcement efforts to cover administrative expenses.

Much of the intensification in auditing has concentrated on correspondence audits, as opposed to face-to-face audits between taxpayers and IRS employees.  Correspondence audits are much faster to complete and cheaper to implement, while attaining the veritable same result.
 

Tampa Tax Attorney, Darrin T. Mish asks "Will the IRS audit you in 2008?" is a post from: IRS Tax Problem Solver Blog - IRS Help

It is all but impossible to stop an IRS audit once it has begun.  The best advice for this IRS problem is to get IRS help . . . immediately.  You need a tax professional to protect your rights and assure the most beneficial outcome possible in this situation.

There are typically three kinds of audits: normal audits, a letter audit, or a fraud audit.  Representation of your case by a knowledgeable member of our staff can be of the utmost importance in settling your case in the best manner available.

The best way to stop an IRS audit is to try and negotiate a settlement.  Don’t attempt this on your own; you definitely need IRS help to solve this IRS problem.  The IRS would rather negotiate a settlement and conclude a case, and go on to the next one, than spend time and resources on a case that may drag on for an indeterminate amount of time.  Using the negotiation method, they can make their way through more cases and spend less time and resources doing so.

The IRS has a substantially high margin of error in these types of cases and you will benefit from the fact that they don’t wish to take a case with perhaps weak facts and evidence to court and possibly waste resources.  That fact is in your favor to negotiate a settlement and stop an IRS audit.

Representatives of the IRS and an Appeals Officer have the power to negotiate and compromise on issues.  You, with knowledgeable IRS help, have the rare advantage of a victory because the IRS desires to complete cases quickly.

The strength of the arguments made by your professional tax consultant on your behalf can bring a 100 percent surety of a settlement in your favor, if the laws and facts back up what is presented.  In other cases where there may be some give-and-take in the strengths or weaknesses of the facts involved in your particular situation, you may arrive at a lesser settlement.  But a settlement with a mutual agreement nonetheless is far better than a complete loss.

The best way to prevent this IRS problem from becoming an issue is to only take legitimate deductions and credits you are entitled to.  A computer program is used to compare individual tax returns against each other, looking for oddities that may arise.  Using this comparison, the computer may “flag” your tax return for further scrutiny.  The ideal would be if your tax return didn’t have any reason to “stand out” from the normal individual’s tax return.

Other things to make sure you do so as not to draw attention to yourself are:

1.  Report all your income.
2.  Ensure your itemized deductions aren’t unusually high compared with your income.
3.  If you are the owner of a business, double-check and triple-check all your figures.  Just due to the fact that you own a business can cause a second glance in your direction because of the extra ability to hide income or take extra deductions that are not real.
4.  Keep accurate records, especially if you are paid in cash.
5.  If you are divorced and have children, make sure both parents know how the other is filing their tax return.
6.  Be especially careful with recordkeeping if you have an offshore account.
7.  Choose a legitimate tax consultant.  The IRS keeps a list of unscrupulous tax preparers and just seeing one of those names will raise a red flag.

Contact our office for IRS help to your IRS problems.  We are legitimate and honest, and our record speaks for itself.  Let us help with your IRS problems today.
 

Can You Stop an IRS Audit? is a post from: IRS Tax Problem Solver Blog - IRS Help