IRS audit

[lovetheprincesses]

Got the dreaded letter for an audit of the last three years, and it asks for loan information. Does that mean car loans and house loans? I did not keep the little coupon things from the bank after my car was paid for. Does this mean I'll get creamed?? Do you think the bank can make copies? Any advice?? Can my CPA meet with them for me or do I have to go too?

 

[koolaidmoms]

Got the dreaded letter for an audit of the last three years, and it asks for loan information. Does that mean car loans and house loans? I did not keep the little coupon things from the bank after my car was paid for. Does this mean I'll get creamed?? Do you think the bank can make copies? Any advice?? Can my CPA meet with them for me or do I have to go too?

Most likely what they are looking for is the information to verify what you took on your return. For you home loan they are probably looking for the 1098 and the information that shows you are not taking more mortgage interest than you are entitled to. How much was initial loan, when refinanced, did you take a HELOC, etc... Is probably what they are going to ask you for.

Cars. Do you take one for a business? Otherwise don't worry about that unless you claimed a credit for something like a hybrid or electric car.

Your CPA can go. It will cost you. You can go if you feel you can justify all the items on your return. It is up to you.

Good luck.

 

[lovetheprincesses]

Thank you SO much for your reply! I am TERRIFIED. I don't really care WHAT it costs to send my CPA!! I might pass out. Seriously. So it sounds like I really just need my mortgage interest statement that I used for my return, and maybe that is it. Hubby does take mileage on his vehicle, but that is it. (running to and from jobs). I am SO nervous. I am gathering everything to take to the CPA. Hopefully I have everything needed.

 

[LuvOrlando]

Uh-oh, fear of an audit is what makes me keep every record I have and why I pay $$$ for a CPA. No way would I go myself. I pay for my CPA's expert advice and handling and its his professional responsibility to make sure everything is in order. Since he created the return it is also his responsibility to defend it. I'd fax him the letter from the IRS with a note that I expected him to defend the return in question on my behalf, call the IRS and tell them my CPA would be handling it then monitor from a distance by staying in contact with both the CPA and IRS separately.

PS, one of my CPA's underlings made a huge mistake with my local filing once, to the tune of $1,000! I let the CPA know what was the problem and he stepped up and paid the difference as soon as he looked into it and saw the mistake was on his side. If this is really all that simple the CPA shouldn't charge you a dime. It is HIS work being called into question, not you.

Good luck and relax. Having a CPA pretty much means you are in the clear. Just make sure you only give him copies to look at, not originals. Keep all your originals in a safe place so you can prove you did what you were supposed to do in case there really was a gross error on your CPA's part so it doesn't land in your lap.

 

[CathrynRose]

Can I give you one piece of advice that my Mom ( a CPS and certified tax consultant) gave to people being audited?

ONe bag, filled with receipts., Not all nicely put together, not all itemized for them, not all organized (even if they already are) UNorganize them, toss them into one grocery bag, loose and amuck.

My mom's clients - all of them, except one - followed her advice. The only one who ended up owing money, in addition to having to bring in several surrounding years of the initial audit year, was the one who didn't follow her advice, and kept their things all fancy schmancy.

Dump it into a shopping bag. Good luck to you.

ETA - just keep in mind, they're just like us. Unless you're REALLLLY a go-getter, most of us truly would rather not have to rummage through a pile of receipts to find what they think you don't have. We're lazy.

 

[lovetheprincesses]

lol. that is funny! okay, so what if my cpa is very neat and organized though???

 

[lovetheprincesses]

Did I mention I'm TERRIFIED?!! EVEN to wait on my cpa to go FOR me. I"M PETRIFIED.

 

[kilee]

I got audited in 1999. I felt the same way. I didn't claim too much buy my earned income credit was high. They concentrated mostly on me proving my child truly lived w/ me. He was 6 at the time and has always lived w/ me since birth, so I found this amusing.

 

[DisneyLover83]

My Dh and I were audited for a total of 6 years, it started in 2005 and they went back to 2002 and going forward from there we were "flagged" for 06 and 07. It is not as scary as the IRS wants you to think. Just take a deep breath and gather the documents they ask for and contact your CPA.

 

[Cheshire Figment]

You are getting the least of the three levels of audits.

What you are doing is having a mail audit. There is an item or two on the return that they cannot do a computer mach to. In you case it seems that you have probably claimed interest on a mortgage and the did not get the corresponding electronic information from the hoder of the mortgage. All you will have to do is get a copy of the Form 1098 for the year in question and send a copy in to the address shown.

Next is an office audit, where you are told certain portions of your return will be reviewed and asking that you come in to the IRS office to support only those parts of the return listed in the letter.

The toughest is the site audit, when an agent will come to your home or office and may ask about any part of the return.

For any of these audits you can get an extension (or two) for good cause, such as having to get duplicate coies of documents, etc.

But an audit is not really anything to worry about. It is a person doing a job to properly enfore the Internal Revenue Code. And, as the late Judge Learned Hand said: "It is as much a violation of law to pay too much tax as too little." I have know of people (not clients of mine) who actually got a refund because of an audit. My clients would not as my avowed rule (and my clients are aware of it) is to take all quesitonable deductions but I will not allow clients to claim illegal deductions.

But a key item is that the letter asked for loan information. Provide that information and nothing else and only for items which you actually claimed on your tax return..

 

[manning]

Cheshire Figment is right, only answer questions asked and don't elaborate. The best answer is yes sir and no sir unless asked to explain something.

 

[lovetheprincesses]

Thank you Cheshire Figment. However, this letter is asking me to meet in two weeks at my home!! I am supposed to bring the listed documents with me. I am going to ask my CPA to meet them at his office however, and take the documents to him there. There is a list of documents and all are checked (bank statements, etc.) It says the year in review begins Jan 1. 2006, but then further on, says Oct 17, 2006 on...so where do i start looking for documentations? Jan or Oct? I'm terrified.

 

[teskak]

Speaking as an AUSTRALIAN income tax auditor who has also worked as an accountant in public practice, I will give my 0.02

I agree with the comments made by Cheshire Figment who I understand is a retired CPA. The goal of most lower level auditors is to go in, get out and move on as quickly as possible. If the question is concerning interest claimed in some fashion, then yes there is probably some sort of data matching between what your bank or financial institution has reported to the IRS and that which is in your return. If they match, great - if they do not match why?

Alternatively they would be looking at your return because there is a threshold of say $X for most claims and you claimed $X + 10%, hence "prove it". Then it is in your interest to make sure all statements reconcile to the amount claimed. Make copies of the statement and highlight the interest amounts, and show how they clearly reconciled to the amount claimed. If there is a question on WHY your claim was or was not allowable then that is what you need your CPA with you to discuss that. Be very careful and let your CPA do the talking if there is any explaining to do.

The third alternative is if the IRS has reservations about the CPA and any of thier activities. As Aussies we would not really plan to visit an individual in thier house unless there was something wrong. Visit a business to talk about sales taxes yes, but not individuals. That would be if anything having the individual come to the office. Have you got any reason to suspect there might be an issue wiht the CPA?

 

[lovetheprincesses]

My husband is a contractor, and has no business office, just our home, so that is why my home is where they are wanting to come. Any advice?

 

[DisneyLover83]

My husband is a contractor, and has no business office, just our home, so that is why my home is where they are wanting to come. Any advice?

My husband was self-employed at the time also, he only had a home office and everything was done at our CPA's office. Your CPA should know exactly what to do and how to handle this, if they are unsure maybe look into a new CPA.