Thursday, February 24, 2011

I Survived an IRS Tax Audit

As one taxpayer explains, visiting an IRS building for an audit is pretty much like visiting any other anonymous corporate office buildings. Except that it might result in you writing a fat check to the government.

CNN reports:

    My road to this second-floor office started with a standard white envelope emblazoned with the dreaded words: Internal Revenue Service. When it arrived at my house in December, I found a five-page letter explaining that my 2008 taxes had been selected for audit. I needed to call "WITHIN 10 DAYS to schedule an appointment."


    About 1.6 million people found themselves in this situation last year, according to the IRS. That means 1.1% of all filers drew the short end of the stick -- and about 300,000 of them were selected because of deductions related to a business venture.

    That's why I got called to answer for myself.

    My husband had an art gallery in Denver and the IRS had a few questions about his 2008 Schedule C, the form where you report income and deductions for your business. I'd filed the form for him, along with the rest of our taxes, using TurboTax.

    Thankfully, when that big scary letter arrived in the mail, it told me exactly what expenses were in question -- all $23,000 of them. That was a relief: I always thought I'd have to show up and answer questions about any part of the return, rather than being able to prepare.

    In our case, the IRS wanted to know about the rent and utilities he paid for the building, as well as a line item for "vehicle deductions."

    So I dutifully called Ms. Green, the name at the top of the letter. The problem was, I told her, it was my husband's business. And we're in the middle of a divorce.

Read more here

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