The Tax
Man – Ron Lykins
2012 IRS Audit-Survival Tips
About two years ago, I informed our clients of an
alarming trend of increased IRS audits. At that time, I reinforced the
importance of maintaining good records.
We have a successful track record of appealing
IRS audit decisions. If you are one of the unlucky taxpayers selected
for an audit, please contact us immediately and we can help.
The key to surviving an IRS audit will be your
records coupled with our knowledge and expertise of dealing with the IRS.
Recently a client was audited and the IRS maintained the client owed nearly
$20,000 of taxes and over $3,000 in penalties. Because the client maintained
good records, we were able to appeal the decision and the case was settled
for less than $750 and the $3,000 in penalties was waived.
Ron's IRS
Audit-Survival Tips
1. Charitable Contributions
The IRS appears to be targeting charitable contributions. Make certain
that you have verification
for ALL of your cash and non-cash contributions.
Click here for the 2011 Charitable Donations Valuation Guide or
contact your tax advisor for a copy.
2. Business Expenses
For 2106 Employee Business Expenses to be deductible they must be
required by your employer.
You need to verify that the expenses are business rather than personal.
These expenses include
business miles, meals, entertainment, supplies, etc. You must keep a
record of business miles and
a log for meals and lodging. In addition, any reimbursements you receive
will offset the
deductions.
Click here for a Business
Entertainment Log.
Click here for a Business Travel Log.
The rules for
employee business expenses also apply to Schedule C self-employment
income and
Schedule E rental income. It is important that you separate business
expenses from personal. Ron Lykins, Inc. CPAs recommends the following:
-
Maintain separate
business accounts for checking and savings, as well as dedicated
business credit cards. If you pay for a business expense out of a
personal checking
account, the IRS will assume it is personal and the appeal will be
an up-hill battle.
-
Maintain a formal
accounting system for the business or rental property. The best way
to
do this is to use a system like Quick Books or better yet, retain an
accountant from our
firm.
-
Make certain
you have a profit motive for the business. Be prepared to be
challenged by
the IRS if you have a loss. IRS routinely challenges the
deductibility of business
expenses. Talk to us about how to document a profit motive.
Our firm prepares every tax return based upon the
assumption that it could be audited. By
maintaining good records, and coupled with our experience and tax knowledge,
you will increase
your survival rate enormously in the event of an IRS audit and keep more of
your hard-earned
money.
Call Ron Lykins, Inc. CPAs today if you have any
questions or if you want a tax advisor to review your record-keeping system.
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