No one wants to be audited by the IRS. Even taxpayers who are certain that their returns were accurate and all of their deductions and other tax write-offs are justifiable are somewhat intimidated by the receipt of notice from the IRS that they have been selected for an audit. Having to offer proof of income, deductions, exemptions and credits, especially if the proof may be missing or inadequate, can be unnerving. Even more unsettling is that the IRS auditor can still disagree with your proof even when you have all your receipts. Beat an IRS Audit provides readers with everything they need to know to handle an audit. From discussing information on avoiding the audit in the first place, to explaining what steps to take to prepare for one if selected, the entire process is simplified and made understandable.

SECTION I: The Basics of U.S. Income Taxation of Individuals

Chapter 1: Income
Who is an Individual?
Income of Individuals
Earnings from Employment
Interest
Rents
Royalties
Dividends
Distributive Share of Partnership Income
Income from Discharge of Indebtedness
Other Section 61 Sources of Gross Income
Gross Income
Income Excluded From Taxation
Gifts and Inheritances
Insurance Proceeds
Recovery of Adjusted Basis from the Sale of an Asset
Gain from a Primary Residence
Assigning Income

Chapter 2: Deductions
Qualifying to Take Business Deductions
The Ordinary and Necessary Requirement
Non-Business Adjustments for Adjusted Gross Income
Deductions Available Only to the Self-Employed
Deductions for Adjusted Gross Income that are Available in General
Deductions from Adjusted Gross Income
Itemized Deductions
Medical and Dental Expenses
Taxes Paid
Itemized Interest Expenses
The Home Mortgage Interest Deduction
Investment Interest
Charitable Contributions
Casualty and Theft Losses
Calculating Personal Deduction for Casualty and Theft Losses
Miscellaneous Deductions
General Limitations on Itemized Deductions
Standard Deduction
Determining Filing Status
Additional Standard Deduction Allowance for the Aged or Blind
Standard Deduction for Those Claimed as a Dependent by Others
Those Ineligible for the Standard Deduction

Chapter 3: Exemptions
Personal Exemptions
Exemptions for Dependents
Relationship Test
Citizenship or Residency Test
Joint Return Test
Gross Income Test
Support Test
Multiple Support Agreements
Children of Divorced or Separated Parents
Audit Aspects of Tax Exemptions

Chapter 4: Federal Income Taxes and Common Tax Credits
Regular Federal Income Taxes
Alternative Minimum Tax
Self-Employment Taxes
Tax Credits

SECTION II: Audit Essentials

Chapter 5: The Audit Process
The Letter Audit
The Office Audit
The Field Audit

Chapter 6: IRS Approaches to Audits
The Bank Deposits Method
Indirect Methods of Establishing Income—Using Earnings to Reconstruct Income
Indirect Methods of Establishing Income—Using Expenditures Plus Increase in Net Worth to Determine Income
The IRS Response to the Cash Hoard Defense

Chapter 7: Circumstances that are Most Likely to Cause an Audit
Income From Self-employment
Using the Services of Independent Contractors
Owning an Interest in a Partnership or Small Business
A Dealer Showing Investment Income in the Items in Which He or She Deals
Securities Dealers
Real Estate Dealers
Royalty Income
Deducting Business Losses
Combining Activities in Order to Qualify for the Presumption
Proving a Profit Motive When the Presumption Does Not Apply
Taking a Deduction for an In-Home Office
Uses That Must Be Both Exclusive and Regular
Uses That Must Be Regular But Not Exclusive
What Draws Attention From the IRS Toward Home Offices
Engaging in Bartering
Taking Abnormally Large Itemized Deductions
Other Activities that May Trigger an Audit

SECTION III: Responding to Audit Notices and Dealing with Deficiencies

Chapter 8: Preparing for an Audit and Responding to the Findings
Keeping Proper Records
Auto Expense Records
Records of Business Meals and Entertainment
Supporting Schedule A Deductions
Making Notes During Preparation of Tax Returns
Responding to an Audit Notice

Chapter 9: Responding to Audit Results and Tax Deficiencies
Dealing with a Tax Deficiency
Consequences of Failure to Pay Taxes
Installment Agreements
Offers In Compromise
Discharging Tax Liability by Filing Bankruptcy

Appendices

James O. Parker has repeatedly encountered clients who were somewhat bewildered by our country’s tax laws, having been a practicing attorney for almost twenty-five years. Calling upon his twenty-seven years as a educator at Christian Brothers University in Memphis Tennessee, and being a small business owner himself for over forty years, Parker takes the mystery out of the tax code.
A former U.S. Marine and community advocate, Parker possesses both a Masters of Arts in Economics from the University of Memphis and an LLM from Emory University in Atlanta, Georgia.

A frequent speaker on tax topics, as well as business succession planning and small business development, Parker continues to advise others on the importance of tax planning.

Mr. Parker lives with his wife, Linda, in Memphis, Tennessee.

 

Beat an IRS Audit by James O. Parker Attorney at Law
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