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Just received an audit notice from IRS for 2011/2012. My receipts

Just received an audit notice...
Just received an audit notice from IRS for 2011/2012.
My receipts have been destroyed and I am concerned that I cannot prove all my expenses. Need some advice on how to proceed.
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Answered in 5 minutes by:
8/22/2013
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Verified

Customer:

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

Customer:

How are you today?

Customer:

Do you still have access to bank statements, and credit card statements for the period in question? Were a multitude of the receipts for cash purchases?

Customer:

You don't have to have receipts, you just have to be able to prove expenses. You can prove expenses through the use of other documents such as bank statements and credit card statements. You can also use other means, such as logbooks and other reasonable measures

Customer:

For example, if you lost your meal receipts but you keep a logbook of your business meals & entertainment, you could use the information in the log to reconstruct a reasonable basis for an expense to deduct

Customer:

I recommend the book, IRS Problem Solver by Dan Pilla for this situation. The book has good information on what to do when you don't have receipts to prove expenses

JACUSTOMER-n3ud3u3h- :

Are you familiar with irs audits

Customer:

Yes, I am

JACUSTOMER-n3ud3u3h- :

I am a realtor...had income of 66,000 in 2010 but had expenses of 30,000 and cannot show even half of it. I am concerned that auditor will turn it over to fraud division. How worried should I be

Customer:

The worst thing that would happen, is they disallow your expenses and assess tax on the portion that you cannot prove

Customer:

I highly doubt they will turn you over to fraud for that little of an amount - $30,000 of taxes is going to get them less than $10,000

Customer:

Criminal fraud cases take significant resources. Worst case scenario in your case I would think would be to disallow all the expenses you cannot prove, and then charge you the 75% civil fraud penalty - but I still doubt they will charge that penalty

JACUSTOMER-n3ud3u3h- :

OK...this makes me feel a little better. Should I have a rep with me in the audit?

Customer:

Losing your receipts is not fraud; Making receipts up is

Customer:

I would ALWAYS take a rep with you to an IRS audit - this is true even if you are a professional that deals with this sort of thing every day.

Customer:

You're too emotionally invested in the situation. YOu need someone there with a level head that knows what the IRS can and cannot do

Customer:

The IRS can lie to you - it's not against the law. They can bluff. An expert knows when to call the bluff and how to get you out of the audit with the least amount of tax debt due

JACUSTOMER-n3ud3u3h- :

do you know of a reasonable service that I could use in Walnut Creek, CA?

Customer:

I would start with your local CPAs.

Customer:

I can't recommend a particular one, but I would go with a local CPA that is practicing in your town. I would not go with a tax negotiation service or a big chain

Customer:

Unless of course you had HR Block prepare your return -sometimes they will give you a free EA (enrolled agent) to take to the audit

Customer:

If you play your cards right, you could even have the audit done completely by correspondence so that you never have to go talk to the auditor

JACUSTOMER-n3ud3u3h- :

This calms me down a little...thanks...what if I have another question with you...how do I get you

Customer:

All that is in the book IRS Problem Solver by Dan Pilla

Customer:

Well, I am in Tennessee and I cannot provide professional services for customers of JustAnswer

Customer:

All I can do is provide general information, unfortunately.

Customer:

Is there anything else I can assist you with today?

JACUSTOMER-n3ud3u3h- :

I will get that book...thanks

Customer:

I would definitely read the book IRS Problem Solver - it will make you feel so much better

Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Verified
Megan C and 87 other Tax Specialists are ready to help you
Ask your own question now

Thanks, XXXXX XXXXX your positive rating. Please come back and visitCustomerfor any of your tax, finance, or social security needs. It was a pleasure working with you today.

CLICK HERE for the site where you can order the tax help book I recommended.

 

If you have further questions, CLICK HERE to request me directly

Thanks again for being a valued JustAnswer.com customer

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Megan C
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16,581
16,581 Satisfied Customers
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

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I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

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