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How to respond to the IRS when you receive an audit letter.

jmilikowsky
Fri, 22 Jul 2016 13:16:37 GMT

Examine the letter and confirm who is being audited - you or your business? The letter will have the IRS Revenue Agent's name and telephone number at the top right. There will also be a deadline to contact the RA within 10 days. Review the remaining part of the letter, which will list the issues IRS is initially looking at (i.e. cost of goods sold, car & truck expense, meals & entertainment, etc.). Next, review your tax return and find supporting documents to confirm two things: 1) your receipts total up to the same number reported for that item; 2) if the item is a business expense, confirm the expense had a "business purpose" and the expense relates to the same business you are filing a tax return for and that IRS is examining. Unrelated business expenses will not help to support your position. The most important first step before talking to the Revenue Agent is to have a game plan and be prepared in knowing the strengths and weaknesses of your position. Do you have the proper documents? Are the numbers you reported on your return accurate? Are your expenses deductible in the year you reported the expenses?