Tax Audit Stories

The tax rules for rental properties can be complicated. Generally, all rentals are considered to be “passive activities,” and taxpayers with incomes over $150,000 are not allowed to claim their passive losses until they either sell the property or have passive income to offset the losses. In a recent audit…
Sometimes faith in what’s right pays off. This was the case for a recent adoption credit examination we defended for one of our members in Wisconsin. The Members were in the process of trying to adopt a child and had incurred $10,720 in adoption expenses that they’d claimed on their…
One of the most rewarding aspects of working at TaxResources is getting to work with our Members and learning about their lives and interests. Our Members represent a great cross section of humanity throughout the United States, and they all seem to have a unique perspective on life. It is…
The following story is about the exceptional service provided by a TaxResources team. With more than five tax professionals on the case, it is a great example of how we put the power of our organization’s skills and experience to work to solve our member’s problems each day. The member…
Audits can be time-consuming, stressful, and serious. When members first contact us for assistance, they can be panicked or confused about where to start and what to do. While our number one priority is to resolve our members’ tax issues as quickly and successfully…
When I was assigned an audit for Schedule A charitable contributions and medical expenses, I knew this would be a challenge. The member had claimed over $37,000 of medical expenses on his tax return. When I first spoke to him he explained that a large portion of the medical expenses…
High deductions for employee expenses are a frequent audit target, especially when they relate to education. The rules are very strict and it isn’t easy to qualify. But just because it isn’t easy doesn’t mean it isn’t possible, and it doesn’t hurt to have an excellent team available to defend…
My case started in November of 2010. Our member was being audited for excess mortgage interest. This was the result of using the Married Filing Separately (MFS) filing status, which limited him to deducting interest on a maximum mortgage amount of $550,000. He had filed using the MFS status because…
Determining whether you have a business or hobby can be confusing, and it is not always clear cut. It has also been the basis of many audits that sometimes result in business expenses being disallowed, which can often cause a high tax increase. This was the case for one taxpayer who…
The IRS was auditing these members for two years, but they had only purchased a membership for one of the years in advance. As a result, instead of the low membership fee that most of our members enjoy, our services were $1,885.95 for the year for which they did not…
My colleague, Vu, always performs exceptional service, but this time she truly bent over backwards for a member who was not able to provide the needed documents in a timely manner. The audit was focused on the Schedule C for self-employment and a Form 1099-A cancellation of debt. A…
Hearing this story from Audit Representative Susie E. made me think of “The Gambler,” a song released and made famous by Kenny Rogers in 1978. Over the many years she’s been representing our members in IRS office audits, Susie has learned a lot about reading a situation and how to…
The member’s case arrived at TaxResources as an IRS Notice of Deficiency (NOD to TRI insiders and tax preparers). This is not the optimum form of “first contact” in dealing with a potential dispute with the IRS. In general, a Notice of Deficiency is the last letter sent to taxpayers…
A Schedule C for self-employment with no income and a $16,000 loss will easily draw the attention of the IRS. This was exactly the scenario for this member in this particular situation. After being audited several times before, with painful results as a result of handling the audits on…
One of my recent cases was very challenging. I worked with a member who had experienced a significant business theft and then, as bad luck would have it, she was audited by the IRS. I was able to help our member, but it took more of a fight than usual…
Here’s one for the books. I never thought the IRS would go for it, but I had to try… The member received a notice questioning her IRA rollover of $212,000 from 2008. The notice included a bill for $62,271, plus penalties and interest, which brought the total due to…
One of the most difficult challenges we face when dealing with an IRS audit is arguing that a business is a ‘for profit’ activity instead of a hobby. If it is a valid business, a loss is allowed on the tax return. The IRS typically presumes an activity is…
One of my most recent exciting cases started out with one our members receiving a bill for $434.79 when she was expecting a refund of nearly $7,000. This is the first notice our member received; however, she had relocated a couple of times since initially filing her return, so…
Before you decide to handle your own IRS audit, you should be alert to all that could go wrong if you do. This month’s case tells the story of an audit that should have been quick and easy to resolve, but we had to go all the way…
Most of us are not comfortable speaking about our personal problems with anyone other than family and close friends, but situations sometimes arise in which we have no choice but to disclose private details about our lives to strangers. The IRS has a way of putting us in…
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