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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
Satisfied Customers: 585
Experience:  10 years experience
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I was audited taxes. I now owe as a result of the audit.

Customer Question

I was audited for 2013 taxes. I now owe for 2013 as a result of the audit. Since we have moved, I have not records for 2013-2016. I had a nervous breakdown trying to track down everything needed for 2013 (two states involved since we moved that year). I cannot go through that again, and I feel like we will likely be audited again for 2014 and 2015.
JA: The Accountant will know how to help. Is there anything else the Accountant should be aware of?
Customer: I already know that I cannot reconstruct everything again for 2014 and 2015 if we are audited, and I feel strongly that we could be audited again.
JA: OK. Got it. I'm sending you to a secure page on JustAnswer so you can place the $5 fully-refundable deposit now. While you're filling out that form, I'll tell the Accountant about your situation and then connect you two.
Customer: Should I amend the tax returns now and and only claim what I easily can access the records for? My nerves cannot handle this again, and my mental state is fragile through the process of trying to retrace all of the records. If I do amend and do not claim anything that I previously had, I know that I will owe even more.
Submitted: 9 months ago.
Category: Tax
Expert:  Lane replied 9 months ago.

Hi,

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I'm not sure I can add a lot to what you've accurately surmised. However, I have a question; What was the outcome of the previous audit?

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If you received a no-change letter and the deductions for 2014 and 2015 are the same items, (and these WERE allowed) you already have some evidence that these same items would be allowed again.

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But using deductions, for only what you have documentation, is CERTAINLY a way to ensure that the audit, if happens, would be favorable.

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ANd I'm so sorry for possibly being vague, but only YOU can measure that stress of not knowing vs the additional tax benfit of taking the more aggressive position and using deductions that, although you know to be valid, are not documentable.

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If you'd like to talk more about the various ways that deductions can be documented (and receipts are NOt necessarily the only method any more), I'd be glad to discuss further.

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See this: https://www.irs.gov/businesses/small-businesses-self-employed/what-kind-of-records-should-i-keep

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And this: (From: http://www.forbes.com/2009/11/23/cohan-irs-tax-charitable-deduction-personal-finance-wood.html)

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Its genesis is the case of Cohan v. Comm’r, 39 F.2d 540 (2d Cir. 1930). Cohan had many of his show business travel and entertainment expenses disallowed by the IRS because he had no receipts. He was frantically busy, he argued, having little time to document his expenses. The IRS panned his performance.

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So Broadway’s then baron took the IRS to court. First he went to the Board of Tax Appeals, the predecessor to today’s U.S. Tax Court. Predictably, the Board of Tax Appeals upheld the IRS–receipts after all, are the stock in trade of a tax system!

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But Cohan appealed to the Second Circuit Court of Appeals, which in 1930 rocked the IRS back on its heals with a one-two punch. Judge Learned Hand would never accede to the Supreme Court, but his tax decisions remain luminary, and the Cohan case does not disappoint. The Cohan Rule serves as an exception to stringent IRS recordkeeping requirements, allowing taxpayers everywhere to prove by “other credible evidence” that they actually incurred the expenses for deductible purposes.

Customer: replied 9 months ago.
It seems to me that you have copied and paste did your replies from other things I read on the Internet. Therefore, this answer really was not helpful. I had already sent my previous injury that taxes were due as a result of the 2013 audit.
Expert:  Lane replied 9 months ago.

So sorry, I missed that piece ... but providing the documentation re: Cohan and it's applicability here are two different things.

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Further providing the IRS guidance on just what DOES suffice as the requisite level of recordkeeping (just as with using another articulation of Cohen) is simply providing third party documentation of my legal knowledge as it applies to your case.

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I would submit to you that these ARE the issues: (1) that receipts alone are not the only way to document, and (2) as I mentioined early on, that only you can measure whether you can withstand the stress of the PURE speculation as to (a) whether you will be audited and (b) the outcome of that audit.

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Given that you had UNfavorable outcomes for the previous audits (again, so sorry that I missed that piece) it would seem intuitively obvious that these issues would not withstand scrutiny again.

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So unless you are able to use the Cohen precident to construct OTHER reasonable documentation AND understand that receipts are NOT the end-alll be all documentation, as a basis for another tack - I'm not sure what you're looking for here.

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Am I missing something?

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Pleas stay with me until we can get to the bottom of this ..;. sometime this venue (short, truncated chats) is not the best way to drill down thoroughly on an issue ... I'd be glad to make an aditional services offer for a call (I'd do so at JustAnswers lowest rate they'll allow, $5) so that we can have a deeper conversation.

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Let me know ... I'll be here

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Lane

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I have a law degree, (Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, on three continents, since 1986.