Being someone who actually has lived through and survived an IRS audit of my
business in the late 1990s, I can tell you that they DO EXPECT you to be
able to produce records of all transactions down to a level of minutiae that
you could NEVER imagine for not only the specific year you are being audited
for, but for the 3 years leading up to it.  I was being audited for Tax Year
1997, and was required to produce all supporting documentation for that
year, as well as 1996, 1995 and 1994.

And the comment made by a dear friend of mine regarding credit card receipts
won't help in the event of an audit.  I had statements ONLY for one of the
years, seeing as each monthly bill detailed WHO the expenditure was with and
when it happened, but the IRS demanded that I produce actual
register/transaction level receipts for some purchases, because they were
unable to ascertain if I had purchased a mix of business and personal items
at locations such as Costco, Office Depot, etc.  And their bottom line was
if the transaction level receipts couldn't be produced, then the expenses
would be disallowed.  Same went for travel costs; they wanted to see where
it stated how many guests were in the room, or how many airline tickets were
purchased.

The one saving grace was I wasn't Incorporated.  As an individual, you can
be audited for CY+6, and up to 10 if they determine there are possible
improprieties in their findings.  But as a Corporation, the limit for audits
extends to 25 years... and what's classic about that is NARA (which is where
ALL TAX RETURNS are held for the IRS) discards returns on a 4 year cycle...
so if you're audited (and selection is done from a database) and the IRS
fails to contact NARA in time to pull your returns to be held for potential
audit, **YOU** are required to produce the copy of the return to support
yourself.

So, put THAT in your Deuteronomy and smoke it...

Larry

-- 
Larry Medina
Danville, CA
RIM Professional since 1972

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