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Winning Your Audit (502)
Author: Holmes F. Crouch
Pages: 224
List Price: $19.95
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  • Summary

    WINNING YOUR AUDIT (T/G 502) covers the "selection for examination" process via DIF scoring, the documents to be presented, the income verification torture, life-style inquiries, informant reportings (on Forms 1099), "cost or other basis" accounting, and the "prickly issues" on Schedules A, C, E, and elsewhere. Also covered:

    • Your "rights" during & after audit
    • Clarifying contradictory positions
    • Mortgage interest "matching"
    • Cautions with luxury auto leasing
    • Wrestling with IRS "adjustments"
    • Example "repetitive audit" hassles

    Table of Contents
    Winning Your Audit
    Book: 502
    
    Table of Content
    
    1.  PURPOSE (s) OF AUDIT                        1-1
    
        Code Section 7602                           1-2
        Determining “Correct Tax”                   1-5
        Meaning of “Any Return”                     1-6
        Basic Revenue Enforcement                   1-8
        Subtle Intimidation                         1-9
        Training of IRS Personnel                   1-12
        Compliance Measurement                      1-13
        Penalty Pyramiding                          1-14
        Evidence of Evasion                         1-15
    
    2.  THE SELECTION PROCESS                       2-1
    
        Procedural Mechanics                        2-2
        National Computer Center                    2-3
        Eyeball Screening                           2-5
        Arithmetical Corrections                    2-6
        Information Matching                        2-9
        Audit Based on DIF Scores                   2-10
        DIF Input Considerations                    2-11
        Final Selection at District Offices         2-13
        Your Chances of Audit?                      2-14
        Selection by Vendetta                       2-15
        Audit Notification Letters                  2-16
    
    3.  POSITIVE ATTITUDE                           3-1
    
        Get Your Act Together                       3-2
        Do Phone for Appointment                    3-3
        After 30 Days: In Default                   3-4
        Reread and Gear Up                          3-6
        Your Rights During Audit                    3-9
        Clarify Contradictory Positions             3-11
        Winning Is Not 100%                         3-12
        The Magic of Good Preparation               3-13
    
    4.  DOCUMENT PREPARATION                        4-1
        
        Discount the Fairy Tales                    4-2
        Recordkeeping IS Required                   4-3
        Know Your Audit Year                        4-4
        Third-Party Documents                       4-7
        Cancelled Checks                            4-8
        Electronic Statement Problems               4-11
        Invoices and Itemizations                   4-12
        Acquisitions and Dispositions               4-13
        Photographs and Sketches                    4-15
        Mileage and Expense Diaries                 4-16
        Self-Serving Declarations                   4-18
    
    5.  INCOME VERIFICATION                         5-1
        
        Gross Income Defined                        5-2
        Items Specifically Excluded                 5-4
        When Payer Forms Inapplicable               5-5
        Income Reconstruction Methods               5-9
        When Records Lost, Destroyed                5-11
        Bank Deposits of Income                     5-12
        Duplicate Deposit Problems                  5-13
        Foreign Bank Accounts                       5-15
        Avoid Substantial Omissions                 5-17
        Understatement of Tax                       5-18
    
    6.  COST OR OTHER BASIS                         6-1
    
        Capital vs. Expense Items                   6-2
        Tax Schedules Affected                      6-3
        Cost as Basis                               6-5
        “Other Basis” Explained                     6-6
        Adjustments to Basis                        6-10
        All Adjustments Arguable                    6-11
        When Assets Sold                            6-13
        Cost of Goods Sold                          6-14
    
    7.  INFORMANT REPORTINGS                        7-1
        
        Big Brother Everywhere                      7-2
        Box 1 on Form W-2                           7-3
        Form 1098: Mortgage Interest                7-5
        Schedule K-1 (1065): Partnerships           7-7
        Form 1099-S: Realty Sales                   7-8
        Menu of Form 1099s                          7-9
        A 1099 for “Each Account”                   7-11
        Form 1099-MISC: The Catchall                7-13
        Other Surveillance Reports                  7-15
        Lining Things Up                            7-16
    
    8.  SCHEDULE A ITEMS                            8-1
            
        Specific AGI Thresholds                     8-2
        Miscellaneous Expenses: 2% AGI              8-4
        Medical Expenses: 7.5% AGI                  8-5
        Casualties and Thefts: 10% AGI              8-6
        Charitable Contributions:  50% AGI          8-8
        Deductible Taxes: No AGI                    8-11
        Mortgage Interest “Matching”                8-12
        Other Interest Deductions                   8-13
        Disaster Loss “Carryback”                   8-15
        Unreimbursed Employee Expenses              8-17
        Other Miscellaneous Deductions              8-18
    
    9.  SCHEDULE C ITEMS                            9-1
    
        Size and Audit Likelihood                   9-2
        Gross Income Verification                   9-3
        Returns and Allowances, Etc.                9-4
        Cost of Goods & Services                    9-4
        Independent Contractors: 1099s              9-7
        Ending Inventory: Sec. 263A                 9-9
        “Ordinary and Necessary”: Sec. 162          9-10
        Exceptions Under Sec. 162                   9-11
        Overview of the Deductions                  9-12
        Line Item Packaging                         9-14
        Pick-Picking at Personal Use                9-16
        1099-MISCs Revisited                        9-17
        The Sec. 179 Expense Election               9-19
        Listed Property: Sec. 280F                  9-20
        Depreciation Classes & Methods              9-22
    
    10. SCHEDULE E ITEMS                            10-1
    
        Rental & Royalty Properties                 10-2
        Personal Use Aspects                        10-3
        “Active Participation” Defined              10-4
        Your Deductible Expenses                    10-6
        Documentation of Income                     10-8
        Depreciation: Straight Line                 10-10
        Depletion of Natural Resources              10-11
        The $25,000 “Loss Limit” Rule               10-12
    
    
    11. PRICKLY ISSUES                              11-1
    
        Business Mileage Log                        11-2    
        Leasing Luxury Autos                        11-3
        Travel & Entertainment                      11-4
        Office-at-Home                              11-5
        Not-for-Profit Activities                   11-9
        “At Risk” Limitation Rule                   11-10
        Alimony Paid & Received                     11-12
        Alternative Minimum Tax                     11-14
    
    12. CLOSING MATTERS                             12-1
    
        Pre-Closing Review                          12-2
        Change Reports                              12-3
        Read the Covering Letter                    12-5
        Example Explanations                        12-7
        Give It One Good Try                        12-8
        Repetitive Audits                           12-10
        To, or Not to, Appeal                       12-11
        Post-Audit Critique                         12-13

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