CASE STUDY 3

IRS Audit Defense & Proposed Assessment

A married couple was selected for an IRS examination after claiming substantial Schedule A and Schedule C deductions. Following the audit, the IRS proposed a significant increase in tax, along with accuracy-related penalties, alleging that key deductions lacked sufficient documentation.

The taxpayers faced:

• A substantial proposed tax assessment
• Disallowance of multiple business and itemized deductions
• Accuracy-related penalties
• The possibility of the audit being expanded to additional tax years

Tax Matters provided a comprehensive audit defense:

• Reconstructed missing financial records
• Organized receipts, bank statements, and mileage documentation
• Prepared a detailed audit response supporting each deduction
• Challenged unsupported IRS adjustments
• Negotiated directly with the IRS examiner to narrow the scope of the examination

The IRS accepted the majority of the supporting documentation and substantially reduced the proposed assessment. More than 80% of the additional tax was eliminated, all penalties were removed, and the audit concluded without expanding to additional tax years.