Audit - errors and omissions in your favor?


T

Thunderbird

If and individual is the subject of a full audit does the IRS deduct
or include any items that would reduce your tax burden that were not
included on your original return in any calculation for additional
taxes due or penalties?
E.g. say you are have business income as an sole proprietor (Sched C)
and are audited for a specific year. The auditor goes through all your
receipts and disallows $10K in travel expenses, but in the process you
also discover and point out that you forgot to include an expense
deduction (you produced the receipt) for $5k e.g. for professional
fees. Will you have have to pay the taxes due and penalties on the
10K (and perhaps file an amended return to recoup the taxes on the 5K)
or will the additional taxes and penalties due from the audit be on
the net $5k?
 
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A

Arthur Kamlet

If and individual is the subject of a full audit does the IRS deduct
or include any items that would reduce your tax burden that were not
included on your original return in any calculation for additional
taxes due or penalties?
E.g. say you are have business income as an sole proprietor (Sched C)
and are audited for a specific year. The auditor goes through all your
receipts and disallows $10K in travel expenses, but in the process you
also discover and point out that you forgot to include an expense
deduction (you produced the receipt) for $5k e.g. for professional
fees. Will you have have to pay the taxes due and penalties on the
10K (and perhaps file an amended return to recoup the taxes on the 5K)
or will the additional taxes and penalties due from the audit be on
the net $5k?

In an audit you and the auditor may discover additional income or
additional expenses. If you both agree with those figures, your
return will be changed to reflect these, and if the additional
expenses you discover are verified by the auditor, no reason they
should not be included.

It is unusual for an audit to produce penalties and interest.
 
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P

paultry

Arthur said:
It is unusual for an audit to produce penalties and interest.
Failure to file penalty will be computed on an audit
deficiency if the original return was filed late. Interest
will accrue on an audit deficiency from the due date of the
return.
 

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