Question: Jack’s 2017 return was examined, and the auditor determined that there were several questionable business deductions. After further review of the return, both you and Jack agree that there were questionable items deducted. Even though a few items claimed as business expenses cannot be supported, most of the expenses deducted can be substantiated by Jack. What options are available if the auditor rejects all expenses deducted on the business return?
Answer: Jack has a few options available. Asking to speak with a supervisor is at the top of the list if the auditor seems unreasonable or biased within the situation. Another option is to request an Audit Reconsideration with the appropriate service center through written correspondence. Also, the request can be obtained by calling the IRS 800 number. The IRS will respond with a list which contains the requested information to reconsider the disputed deductions. This process should delay collections if the supporting information is provided to the IRS within 30 days from the date of contact.
While the audit is in process, Jack can request the auditor file a Technical Advice Memorandum (TAM) if the circumstances involved have not been addressed or if lack of uniformity exists for similar facts and circumstances. Only the agent or director can file a TAM. Jack will be provided a copy that he can modify by submitting a supplementary statement to the national office. If the audit is closed and the reconsideration does not produce the desired results, Jack can file an appeal as a final option.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing. All taxpayer circumstances are different, and NATP recommends contacting research services if you have specific questions about your clients’ tax situations.