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Here.. Yesterday i got an audit examination letter from IRS…

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This is Rajesh here..

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

Yesterday i got an audit examination letter from IRS for my period 2015 asking for miscellaneous deductions.But worst thing is, Since it is almost 2 years, i do not have my receipts stored... for eg, parking, meals etc.. is there a way to help me plz with some suggestions?

Accountant's Assistant: Is there anything else the Accountant should be aware of?

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Answered in 4 minutes by:
1/4/2018
Carter McBride
Carter McBride, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,312
Experience: Adjunct Professor
Verified

Hey! I'm Carter, I'm a CPA and can help you out with this.

You should come up with a list of the each transaction that makes up each expense. If you can do that, you can ask the IRS to sample the transactions, which means they will only look at a handful of them to see if they are accurate.

While you do not have receipts, the IRS will often accept bank statements that show the transactions. That gives them a way to trace the transaction back to make sure it is legitimate.

Another way to go if you cannot get the IRS to accept bank statements is the Cohan rule. This allows you to substantiate some but not all expenses (i.e. you cannot substantiate meals using this rule) based on the fact that you would have needed to incur such an expense. This is usually a last ditch measure as the IRS will disallow the expense and then allow what they believe is reasonable.

Hope that helps. If there is anything else, just let me know. If not, please leave a rating. Thanks!

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Customer reply replied 7 months ago
Thanks. So, In this what they will be doing if i not able to show the expenses in both the ways receipts and bank statements. Is there any ways to get an one time exemptions? or is there any way to convert my tax filings from Itemized to Standard now for 2015 year?

Most auditors will accept just bank statements but may require receipts as well. If they do not and disallow everything, you need to request the Cohan rule be used for the appropriate expenses.

There are no one time exemptions.

If the IRS disallows enough of your deductions, then they will automatically use the standard deduction instead.

If there is anything else, just let me know. If not, please leave a rating. Thanks!

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Customer reply replied 7 months ago
Grt, Thx.You are really helping me a lot..Is there anyway to deal with this in person instead mail or Fax? What would be the time duration? If i keep only few part of expenses with bank statements. for eg, monthly apartment rent, internet expenses etc... which means only 50% of proofs i can show... rest 50% i lost the proof completely which i cannot show.. In this case, IRS will disallow my complete deductions or they consider only for the proof i have and adjust the statement accordingly.. Plz help...

Since its a mail audit, you can only fax them the material. I would do a cover letter, list out each transaction like I said previously and then foot that transaction to a bank statement. Time duration on these is usually a couple of months. If they do not accept something they will give you another chance to provide the relevant documents.

Yea, if you do not have anything to substantiate an expense, then the IRS will not accept it. They will accept anything you can show you actually spent money on. So if you had $20,000 of itemized misc. expenses and you show proof of $15,000, they will give you $15,000.

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Customer reply replied 7 months ago
Ok, Thx for the informations and help provided... and finally, I heard from auditor that the meal expenses per day minimum of $65 does not require to show proof. is that true? in that case for meals dont i need to show proof and can i calculate $20 of meal * working days and put this note in my cover letter?

Yes, you are allowed to deduct the per diem amount off $65. So, you would just need to provide the amount of days you were in travel status in order to substantiate the expense.

Carter McBride
Carter McBride, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,312
Experience: Adjunct Professor
Verified
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