Audit Alert #2 – Letter from the IRS?

What to do when you get a letter from the IRS.

uh oh signYou’ve gotten a letter from the IRS.  Don’t panic.

Call your tax preparer, but a note of caution; you need someone who can represent you in front of the IRS.  You do not want to do this alone.  If you do not have an Enrolled Agent to work with – you want one. EAs are the only federally licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS.

I am an Enrolled Agent, and if you want someone local to you, you can locate an Enrolled Agent by contacting the National Association of Enrolled Agents, NAEA.  If you want to learn what is an Enrolled Agent and what distinguishes them from other tax preparers, please read Enrolled Agents .

As far as actions – here’s what you do:  gather all of the materials they request in the letter.  Do exactly as they ask.  The IRS is pretty specific.  If they are asking for documentation on your vehicle, you will need to send, for example:

  1. Copies of all repair receipts, inspection slips, and other specific records showing total mileage for the year.
  2. Copy of log books and other records that support your mileage claim.
  3. Copy of your appointment book or daily activity log for the year or years requested.
  4. Copies of all receipts for actual expenses (if you are claiming them).  That includes invoices, canceled checks, gas, oil, tires, repairs, insurances, interest, tags, taxes, etc.
  5. Copy of bill of sale or title to vehicle.

Keep in mind what the IRS is looking for when they do a “match” :

  • Vehicle odometer reading for a specific repair bill needs to MATCH mileage in your log book.
  • Vehicle inspection slip odometer reading needs to MATCH mileage in your log book.
  • Mileage between repair shops if you are claiming that mileage.
  • Business activities that corresponds to your appointment book or activity log mileage supporting your claims.