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Three steps when IRS questions a deduction

On behalf of Goldburd McCone LLP | Sep 27, 2018 | Tax Audits

You have likely heard the adage “innocent until proven guilty.” Although this holds true in most criminal cases, it does not apply to investigations by the Internal Revenue Service (IRS).

How are investigations by the IRS different? Taxpayers generally bear the burden of establishing innocence when audited by the IRS. If the IRS questions a deduction, the taxpayer must provide evidence to support the claim.

So how do you meet this burden? These three steps can help you defend a tax deduction:

1)   Expense. First, keep copies of the deducted expense. A copy of a bill will generally suffice.

2)   Payment. Next, keep documentation to show the expense was paid. A receipt or credit card bill could work.

3)   Qualified. Finally, establish the expense qualified for a deduction. This can include business expenses, charitable contributions, student loan interest payments and certain moving expenses as well as dependency exemptions to name a few.

All three steps are needed. A failure to establish any one of these steps can result in a loss of the deduction.

It is generally best to gather and present evidence to the IRS that address the exact questions. It is wise to avoid providing additional information as this can lead to an extended audit.

Do I need a lawyer? In some cases, getting a lawyer is a good idea. This can include cases where the IRS does not rule in your favor and you are considering an appeal. You can help further mitigate the risk of additional questions and protect your interests by seeking legal counsel. Our attorneys at Goldburd McCone, LLP can help.

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Fax: 212-302-8973
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Fax: 212-302-8973
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Visit Our Manhattan Office

Goldburd McCone LLP

11 Broadway
Suite 1155
New York, NY 10004

Phone : 212-235-1817
Fax: 212-302-8973
Manhattan Tax Law Office

Long Island Office

499 Chestnut St .
Cedarhurst, NY 11516

Phone : 516-856-0545
Fax: 212-302-8973
Long Island Tax Office

Client Payment Portal

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