“Well, congratulations, you just received an audit notice from one of the most aggressive creditor known to mankind, the Internal Revenue Service, on your filed income tax return.

Of course, your immediate reaction is “YIKES!!!!”, and “WHAT TO DO!!!” The first step is, of course to take a deep breath and calm yourself and DON’T PANIC!!!

Remember an audit is really where the IRS (or any other state income tax agency) is responding to what was asserted and/or claimed (either as a deduction and/or an income exclusion) on the filed income tax return. Thusly, guess who has the burden of proof. Yes, you the taxpayer.

Main goal on meeting this burden of proof, just like in a court of law is to have DOCUMENTARY evidence, to back you up.

The main issue in most tax audits on deductions (be it personal or business) is to prove that you actually spent the money, by having and submitting cancelled checks and actual receipts. Contrary to popular belief, showing the transactions, in order to prove the deduction, on a bank statement would not be enough, because most (if not all) bank statements do not have much detailed descriptions of the transactions.

If you do just submit a bank statement as proof, do not be surprised that you will not prevail in the audit, because the IRS will ask for more detail information, or at worse deny you claim.

Also, think of the audit as an opportunity of just not only to sustain what was claimed on the tax, but you could raise issues that were missed when the tax return was initially filed that would be more in your favor, e.g. forgetting a deduction, or discovering a understated deduction.

What you need to do for an audit. First, get a licensed tax person, e.g. An Enrolled Agent. If you need one, contact us [email protected]. Secondly, you need to organize your records and receipts in a very simplistic way so that any person (let alone an IRS auditor/revenue agent) could easily “follow-the-dots”. It goes with the old idea; the simpler and easier an argument or case one can make, the easier it will be digested, understood, and even would be accepted.

That’s what an audit is, an opportunity to present your case, and just simply to take up the challenge.

Feel free to visit our website for more detailed information on audits https://www.kayatax.com/audit