Many people dread the mere thought of an Internal Revenue Service (IRS) audit. However, these days, you’re most likely to receive a “desk” audit whereby a missing income item or proper documentation for a deduction is requested. Sometimes this happens because the taxpayer doesn’t receive or misplaces a source of income and they don’t have an alternative source of knowledge about that income, so an adjustment is necessary. In cases like this, the matter is then easily resolved through a payment by the taxpayer, while the IRS is successful in finding money for the government.
At Czar Beer, we sometimes work with some clients who reveal that while they have deductions, the record keeping burdens can create a situation where the deduction amount is correct but adequate documentation is not readily available.
We are not suggesting that everyone should drop everything else that goes on in their lives to invest a huge amount of time into meeting the IRS requirements, but we would like to take this opportunity to remind you that taxpayers are required to maintain adequate documentation for certain deductions on certain forms. Additionally, be mindful of the fact that several tax court cases came down to negative conclusions not only for the tax due but also for not maintaining adequate records and the court upheld the accuracy-related penalties assessed by the IRS.
To avoid this you should discuss contemporaneous record requirements with your tax professional to assure that you only spend required time, but still have the documentation needed to meet the IRS’ minimum requirements.
Whether you are a business, individual, or non-profit, we can outline specific steps that you should take to minimize taxes, maintain appropriate records and successfully defend your deductions if you are audited.
For more information, contact us at firstname.lastname@example.org or (212) 397-2970.