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Mike DiSabatino CPA

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Seeing Inside the Mind of the IRS: Using the IRS Audit Technique Guidelines (ATGs)


While most of us are never audited, when it happens we can feel like a lamb thrown in a room with a lion. The IRS auditor does these audits every day. They know what to look for, and may ask leading questions that are easy to answer incorrectly. Here are some tips to help you when you are in the crosshairs of an IRS audit.

  • Timely address IRS correspondence. Do not let any issues raised in an IRS correspondence letter get to a point where a face-to-face examination is required.
  • Ask for help. Do this right away. Too many clients think the problem is easy to resolve, but inadvertently say the wrong thing, resulting in another audit issue.
  • Understand what's being asked. Clearly understanding the core question behind the audit can simplify the solution. Why is the IRS asking to see your 1099s? Do they have a form that you do not? Why are they asking about your small business profits? Are they thinking your business is a hobby?
  • See the audit the way an IRS auditor is trained to see it. The IRS focuses auditor training on several areas. These are published in Audit Techniques Guides (ATGs) and are available for review on their web site at www.irs.gov (search for "Audit Techniques Guides" in the search bar). They are invaluable in identifying areas for potential audits, and can help you understand what the IRS likes to question. While most of the ATGs deal with business taxation, reviewing the topics can be useful in understanding where audit risks are and what you can do to prepare yourself in case of an audit.

Common ATG Topics:

* Architects * Art Galleries * Attorneys
* Business Consultants * Capitalization versus Repairs * Cash Based Business
* Child Care Provider * Construction * Research Credits
* Farmers * Hobbies (activity not engaged for profit) * Lawsuit Awards/Settlement
* Ministers * Partnerships * Retail
* Veterinary Medicine * Winery/Vineyards  

If you have business activity that touches any of these topics, it makes sense to understand how IRS auditor is trained. By reviewing the specific ATG you will know the process of the IRS audit and gain some insight into how the auditor will proceed.

 As always, feel free to pass this Tip along to friends, and reach out if you need help with your personal tax and finance situation.

DiSabatino CPA
Michael DiSabatino
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Camarillo, CA 93012
Phone: 805-389-7300

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