Tax deductions are a crucial way taxpayers reduce their overall tax burden. Unfortunately, the IRS will sometimes challenge the deductions you take. If you are unable to provide support to verify the legitimacy of these deductions, you may end up having to pay a higher tax bill than you initially planned for. You may also incur penalties and interests.
Take These Four Steps When the IRS Challenges Your Tax Deductions
The number one reason the IRS will disallow deductions is a lack of documentation. The good news for taxpayers is that the IRS’s claims can be disputed. In addition, even if there is not substantial documentation to back up the deduction, the taxpayer may be able to succeed with regard to the IRS’s challenge. Here are four recommended steps to take if you find yourself in this situation:
- Contact an attorney experienced dealing with the IRS and taxpayer problems. Having an advocate in your corner improves your chances of resolving your tax issue favorably.
- Prepare an affidavit that proves the deductions you took. This affidavit should be signed under the penalty of perjury. The affidavit takes the form of testimony that was given in a court of law. If the affidavit is plausible, credible, and ucontroverted, it must be accepted by the IRS.
- Gather canceled checks that correlate to the deductions.
- Obtain receipts that document the deductions.
If you are facing an IRS tax problem, the important thing is to take action and not ignore the issue in hopes that it will go away. We encourage you to contact us today for more information at 800-721-7054.