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Like a worst-case-scenario guide for taxes, tax attorney Fred Daly‘s Stand Up To The IRS helps you prepare for an IRS audit. Best of all, he’s released all the chapters online for free.
Stand Up to the IRS [The Tax Law Offices of Fred Daily via Lifehacker]
My plan for beating an IRS audit doesn’t require any reading. I just don’t cheat on my taxes.
@I_am_Awesome: You win! Your prize is not getting audited.
@I_am_Awesome: Or you could, you know, become a member of Congress. I hear they don’t pay taxes either.
You don’t have to cheat to get audited, and all it takes to lose is a misplaced receipt.
Or, more regularly, the IRS (or Revenue Canada) checks the average income in your area and notices yours is outside the curve.
I expect once I finally start to rein in my finances, I’ll end up audited, because my life plan is to live well below my means. That probably means making twice the income of my neighbours wherever I live.
Also note that the IRS will audit a percentage of returns at random, so it’s possible to be audited even if you made no mistakes whatsoever.
Unless you have very simple taxes (e.g. you just get a paycheck with taxes withheld, don’t make many or any investments, etc) – it is not as easy as “just don’t cheat”. If you have your own business or make a lot of investments your taxes can get pretty complicated, especially at higher incomes. You’re more likely to get audited and even though you didn’t cheat you can end up fighting the IRS on various issues.
Unfortunately my grandmother has been getting ripped off by some mystery woman and has apparently not filed her taxes for the last four years! (She filed them with the lady, but the lady just took her money.) This will hopefully help us out…
@wildhare11: Wow, that’s rough. From what I’ve heard, though, that’s the sort of situation where the IRS is generally pretty easy to work with as long as it’s reasonably plausible, so hopefully it’ll be true for you. Your poor grandmother.
Yeah well its not as easy as ‘just pay your taxes’ or ‘don’t cheat on your taxes. If only. I had an accountant years ago that was filing fraudulent ‘amended forms’ on behalf of her clients without their knowledge and then keeping the money received. Unfortunately I was one of her clients that got caught up in the mess she created. Yes, she went to jail BUT the IRS in their infinite wisdom held her clients accountable for the money!!! I fought it for nearly 5 years and finally got them to accept a small sum vs the actual amount ‘owed’. I wanted to see her hung for doing that to us.
I was audited last year for taxes from 2005… IRS ended up owing ME $2100 and even paid interest.
They thought I underpaid on some stock sale profits, but actually I had miscalculated and paid too much.
I don’t understand why people are so afraid of IRS audits. If you cheated on your taxes, then you have what’s coming to you. If you were truthful in your tax forms, then what the hell is there to worry about.
I have always filed my taxes honestly, but some one used my SSN at jobs they were getting 1099′s for. So the IRS had tens of thousands of reported income on money I never saw – wham instant audit.
Not knowing why I was being audited, and knowing did nothing wrong I let them come to my house for a “review”. Big mistake, this guy went thru my garage and wanted to see the old cloths and other stuff that was boxed up. Like I was hiding gold bars or some thing. After he left I felt things went good, till I got a letter saying I owed 40k in back taxes!! Instantly I went and hired an accountant. We went back and forth with the auditor for 8 months going over every purchase and tracing every dollar I had spent over the past 3 years and where it came from. My accountant had no idea what they were looking for. Suddenly out of the blue the auditor was fired by the IRS, I got a new auditor a real nice guy. And after not budging one dime on the 40k with the other guy I had an offer for 5k owed. I said no and continued to fight. At that time the new auditor informed me that 1099′s had been reported for years with my SSN. My accountant said they must have figured out it was ID theft but didn’t want to walk away empty handed. After all, the IRS had wasted almost a year and who knows how many tax dollars on my audit.
after almost a year we got it down to $1,200, I still wasn’t happy as I didn’t owe it. The new auditor said it was done and if I wanted to continue to fight, I could do it in tax court. My accountant took me aside and told me the attorney for tax court would cost at least 10k. So I payed it to just end the whole thing..
Total cost of the audit
$4,500 to accountant
$1,200 to IRS
$2,600 in lost wages (time off needed to deal with an audit)
Grand total $8,300
And FYI my Accountant considered this a win. If you get an audit its going to cost you even if you don’t have to pay the IRS. The new auditor also told me at least 90% of all audits the people pay some thing.
Take advantage of their “amnesty” when it’s offered.
Sumgai, clearly you are not an accountant.
The IRS has a bad habit of hiring some auditors who deciding someone is guilty until proven innocent…. a.k.a. they are your records, you prove you did it right.
Have you ever thrown a way a gas-station receipt? Better hope you didn’t take that deduction!
That being said, I have seen a lot of auditors who are much more amicable…
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