Full Description

No one wants to be audited by the IRS. Even taxpayers who are certain that their returns were accurate and all of their deductions and other tax write-offs are justifiable are somewhat intimidated by the receipt of notice from the IRS that they have been selected for an audit. Having to offer proof of income, deductions, exemptions and credits, especially if the proof may be missing or inadequate, can be unnerving. Even more unsettling is that the IRS auditor can still disagree with your proof even when you have all your receipts.

Beat an IRS Audit provides readers with everything they need to know to handle an audit. From discussing information on avoiding the audit in the first place, to explaining what steps to take to prepare for one if selected, the entire process is simplified and made understandable.

Table of Contents

Introduction

SECTION I: The Basics of U.S. Income Taxation of Individuals

Chapter One: Income
Who is an Individual?
Income of Individuals
Earnings from Employment
Interest
Rents
Royalties
Dividends
Distributive Share of Partnership Income
Income from Discharge of Indebtedness
Other Section 61 Sources of Gross Income
Gross Income
Income Excluded From Taxation
Gifts and Inheritances
Insurance Proceeds
Recovery of Adjusted Basis from the Sale of an Asset
Gain from a Primary Residence
Assigning Income

Chapter Two: Deductions
Qualifying to Take Business Deductions
The Ordinary and Necessary Requirement
Non-Business Adjustments for Adjusted Gross Income
Deductions Available Only to the Self-Employed
Deductions for Adjusted Gross Income that are Available in General
Deductions from Adjusted Gross Income
Itemized Deductions
Medical and Dental Expenses
Taxes Paid
Itemized Interest Expenses
The Home Mortgage Interest Deduction
Investment Interest
Charitable Contributions
Casualty and Theft Losses
Calculating the Personal Deduction for Casualty and Theft Losses
Miscellaneous Deductions
The General Limitations on Itemized Deductions
The Standard Deduction
Determining Filing Status
Additional Standard Deduction Allowance for the Aged or Blind
The Standard Deduction for Those Claimed as a Dependent by Others
Those Ineligible for the Standard Deduction

Chapter Three: Exemptions
Personal Exemptions
Exemptions for Dependents
The Relationship Test
The Citizenship or Residency Test
The Joint Return Test
The Gross Income Test
The Support Test
Multiple Support Agreements
Children of Divorced or Separated Parents
Audit Aspects of Tax Exemptions

Chapter Four: Federal Income Taxes and Common Tax Credits
Regular Federal Income Taxes
Alternative Minimum Tax
Self-Employment Taxes
Tax Credits

SECTION II: Audit Essentials

Chapter Five: The Audit Process
The Letter Audit
The Office Audit
The Field Audit

Chapter Six: IRS Approaches to Audits
The Bank Deposits Method
Indirect Methods of Establishing Income—Using Earnings to Reconstruct Income
Indirect Methods of Establishing Income—Using Expenditures Plus Increase in Net Worth to Determine Income
The IRS Response to the Cash Hoard Defense

Chapter Seven: Circumstances that are Most Likely to Cause an Audit
Income From Self-employment
Using the Services of Independent Contractors
Owning an Interest in a Partnership or Small Business
A Dealer Showing Investment Income in the Items in Which He or She Deals
Securities Dealers
Real Estate Dealers
Royalty Income
Deducting Business Losses
Combining Activities in Order to Qualify for the Presumption
Proving a Profit Motive When the Presumption Does Not Apply
Taking a Deduction for an In-Home Office
Uses That Must Be Both Exclusive and Regular
Uses That Must Be Regular But Not Exclusive
What Draws Attention From the IRS Toward Home Offices
Engaging in Bartering
Taking Abnormally Large Itemized Deductions
Other Activities that May Trigger an Audit

SECTION III: Responding to Audit Notices and Dealing with Deficiencies

Chapter Eight: Preparing for an Audit and Responding to the Findings
Keeping Proper Records
Auto Expense Records
Records of Business Meals and Entertainment
Supporting Schedule A Deductions
Making Notes During Preparation of Tax Returns
Responding to an Audit Notice

Chapter Nine: Responding to Audit Results and Tax Deficiencies
Dealing with a Tax Deficiency
Consequences of Failure to Pay Taxes
Installment Agreements
Offers In Compromise
Discharging Tax Liability by Filing Bankruptcy

Glossary
Appendix A: IRS Form 656, Offer in Compromise
Appendix B: Payment Plans
Appendix C: IRS Form 2848, Power of Attorney and Declaration of Representative
Index
About the Author

Excerpt

Editorial Reviews

Customer Reviews

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