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Surviving A Tax Audit
Ground rules you can set for
an audit
- If you receive an audit notice from the IRS, it is very important that
you know the rules and even more important to let the IRS know you are
not an uninformed taxpayer. The more rights you assert, the better off
you will be. You begin to assert those rights by being the one to establish
the ground rules of an audit. In my book IRS,
TAXES and the BEAST, I have identified numerous ground rules.
Here are three of those right now.
- You have the right to conduct the audit at a time and place that is
convenient to you. Use this right to prepare and avoid being caught off
guard.
- You have the right to record an audit as long as you give the IRS the
same right. Using this right prevents the IRS from changing the rules midway
through the audit.
- You have the right to limit the scope of the audit to avoid time and
trouble discussing issues not relevant to your tax liability.
- For more information about the eleven ground rules you must establish
to insure a fair audit of your tax return, order my book IRS, TAXES and the BEAST.
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How to call IRS bluffs
- Former Senator Henry Bellmon once said, "In a recent conversation
with an official of the IRS, I was amazed when he told me, 'If the taxpayers
of this country ever discover that the IRS operates on 90% bluff,
the entire system will collapse'." When you know what these bluffs
are, you will never be asked or forced to pay taxes you do not owe.
- Here are some common bluffs:
- Bluff One - You cannot claim a deduction without a receipt or
canceled check.
- Bluff Two - You have no right to challenge an auditor's decision.
- Bluff Three - You must disclose every aspect of your financial
life.
- These claims are not true. You have rights -- and when you use them,
you will pay less tax with less hassle. For more information, order my
book IRS, TAXES and the BEAST.
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Proving deductions without
a receipt
- Some IRS auditors would have you believe you must have a receipt or
canceled check to claim a deduction. But, there are six ways to prove
deductions if your records are lost. Few people realize that oral testimony
is often enough to claim a deduction as long as it is believable and supported
by the facts. Affidavits and reconstructed records are also valuable tools
used to claim deductions where typical records are unavailable. Cash contributions
are a good example of deductions that go unclaimed because of the lack
of written records. To prevent the IRS from claiming you have insufficient
records to claim a deduction, know your rights.
- For more information, order my books IRS,
TAXES and the BEAST, and The IRS
Problem Solver Book.
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IRS forms you should never
sign
- In an audit there are forms the auditor may ask you to sign that can
take away your rights. You could lose your right to appeal, your
right to claim deductions and your right to prevent enforced collection
action.
- Form 872 is one of these forms. It extends the amount of time the IRS
can take to assess a tax -- time they may not have if you don't sign. For
more information order my book IRS,
TAXES and the BEAST.
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How to spy on the IRS
- Few people know the IRS keeps secret records about every taxpayer.
This record is called your Individual Master File. Knowing the content
of this file can be very useful to the taxpayer. It's like spying on the
IRS. For example, everything the IRS intends to do regarding one or more
of your tax returns is reported in this file. When you use my techniques
for accessing these files (you have this right under the Freedom Of Information
Act), you can predict audits, collection actions -- even criminal prosecutions.
How well could you prepare for IRS actions against you if you knew months
ahead of time when they were coming?
- For information on how you can spy on the IRS to protect your wealth
and property, order my book Taxpayers' Ultimate
Defense Manual. Don't be caught off guard.
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Audits by mail
- Just the thought of having to deal with the IRS scares people into
submission. But, did you know you have the right to conduct an audit by
mail? As long as you set the ground rules as discussed earlier, and cooperate
fully in providing the IRS with details of your claims, you can conduct
an audit through the mail and never have to worry about a face-to-face
confrontation.
- The greatest advantage to conducting an audit by mail is that you will
never be caught off guard. You will never have to answer questions
without being able to fully contemplate the need to provide the information
requested. It is not uncommon for the IRS to make arbitrary determinations
based on information they obtain that is really irrelevant to the return
and the claims made therein. Avoid this trap by conducting your audit by
mail.
- You can learn all you need about the Mail-Order-Audit from my book The
IRS Problem Solver.
and IRS, TAXES and the BEAST
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How to appeal an audit decision
- The perceived power an IRS auditor has is that he is one of the most
feared IRS employees. But, did you know an IRS auditor really has no power
to change your tax liability, charge a penalty or seize your assets? In
fact, an IRS auditor has no power to do anything without your permission.
- Every citizen who disagrees with an IRS auditor has the right to bring
an audit decision to a higher level of authority. This process is called
the Right of Appeal. Just knowing this right often prevents the auditor
from trying to bluff you into paying more tax than you owe. It's the best
negotiating tool one can have. To learn more about your right to appeal
an auditor decision, order my book IRS, TAXES
and the BEAST.
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How to recover the cost of
an abusive audit
- IRS' own internal statistics show that when challenged, the decisions
made by IRS auditors are wrong more than half the time. If an auditor tries
to deny your rights and collect more money than you owe, you have the right
to appeal that decision and recover fees and the cost of enduring an unfair
audit.
- These costs may include travel, professional fees, postage, parking
or any other cost incurred to defend against unjust claims. For more information
on how to recover fees and costs, order my book, Taxpayers'
Ultimate Defense Manual.
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When and how to use Tax Court
- Just knowing this right can prevent you from ever having to use it.
Petitioning the Tax Court is the ultimate appeal of a decision made by
an IRS auditor. Statistics show that citizens who use their right to appeal
auditor decisions, along with their right to petition the Tax Court, win
60-90% of the time.
- Statistics also show that, in most cases, when a Tax Court petition
is filed, the case never goes to trial. In every case, the IRS tries to
avoid a trial and negotiate a settlement. Tax Court is your court -- but
only when you know how to use it. For information on how to use the Tax
Court to defend yourself from unjust audit decisions, order my book Taxpayers' Ultimate Defense Manual.
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