You Had A Proper IRS Investigation?

I had one last year for my business. I'd say it all depends on who is doing the audit, you might get a lazy fuck that doesn't want to look deep into things or you can get a newbie who does everything by the book. I think it's best to have them conduct the audit with your accountant, bombard them with paperwork/files, and schedule it on a friday : )

Audits

They're called Audits.
Some are very superficial, some examine every penny in & out and add up the value of your lifestyle to see if it matches your income.

IRS agents are under the gun to clear cases, so they will bargain like a merchant at a bazaar. Friend negotiated a $350,000 tax bill down to $5,000 as his current and future income was much less than 10 years earlier. He never made nor they could prove he ever made what they claimed.

Don't skimp on paying an accountant. If you're in Dubai and have serious US income, hire one of the big 3 accounting firms for tax information. I worked for a former employee of one. The company we were working at, one new rule gave the company $30,000,000 tax deduction. I worked on one rule that got us a $3,000,000 extra refund from Florida 2 years running.

I guess the purpose of audits are to scare everyone into not trying scam on taxes.

So don't scam on taxes and everything will be OK.

IRS Agents

They do like a bit of fear in you, does make it easier for them. However the tax code is so complicated that some rules contradict themselves, so it depends on the agent you get or if it goes to court, the judge you get.

With computers, the US needs only a few accountants. With the tax laws, the US needs a whole army of accountants.

I don't think there's anything that can be 100% perfect, though. There has to be minor discrepancies in everyone's returns -- especially a business. I haven't been through an audit myself, but I know people who have and they've told me that little mistakes will slide. They're just looking to snag the major offenders who think they're getting away with something.

The government is ripping us all off anyway, but it's not worth it to try to get over on the system. That shit will catch up with you eventually.

the accountant I use behaves as if we will get audited, so we keep the books with this in mind.

Im going to give you REALLY REALLY REALLY good advice

Hire a CPA or a Tax attorney to go to the audit ON YOUR BEHALF...sign over the power of attny and YOU stay the hell away from the audit.

any attny or CPA who cant tell you why this is REALLY good advice is not someone you want to hire. You may pay 5 to 10K but you will save a LOT more than that

I was audited a few years ago - someone stole $4k of checks out of my mailbox, I reported it as a loss without supporting paperwork, and that triggered an audit.

It wasn't terrible, but I played it cooperative. My financial picture for that year happened to be really complex, which made it a bit tougher than it had to be. I ended up paying an extra thousand, but that was for another basically dumb mistake.

You want to avoid seeming like you are too uncooperative or hiding stuff. I played it more incompetent than anything.

The advice to get an accountant is good advice - but I did not go that route, I did it myself.

They caught the person who stole the checks - but I have never seen a dime of the ordered compensation.

Taxes

Sounds crazy, but I worked in the tax department of a major corp., but never do my own taxes. I don't like tax law or payroll accounting. I just did research or unclaimed property.

I've had tax accountants so worried, that deductions I knew were legit would trigger an audit (bring it on, I'll win). I've had idiots who tried to tell me income from sales were the same as wages.

Best rule of thumb, the more income, the higher up the accounting ladder you go. Same as a criminal charge. Parking ticket, easier to pay, even if innocent. Minor crime, local hack attorney. O.J. like crime, do what he did, spend the money, hire the best & win.

Only difference between criminal action and taxes is criminal action leaves fewer dead bodies. Just ask Al Capone. (JOKE)

If you don't do it yourself, hire someone good at documenting everything. Then write up reports of the documentation including indexes and any pictures. Works for insurance claims, works for tax problems and medical problems. My attorney was impressed with my documentation of a financial issue he's handling and I described to him a medical/financial issue he referred me to another attorney. Not only was he impressed over the medical/financial issue, but I won my case Friday. Here comes some health care & money. As for his case, we expect to kick ass. Judge at last hearing wasn't believing their lawyer at all.

It's horrible, good luck.
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They are worth every penny, I have been fighting an audit for over a year now. Best $199 i spent on Audit Defense above the 3k for the taxes.

Detailed records and everything and they still like to try to get you for loop holes that they created. My CPA is earning every penny.