The Reality of IRS Audits

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We’ve talked a lot about the more aggressive IRS audits for real estate professionals and real estate investors. I received an email from one of the TL Community members who had just gone through an audit of cell phone usage. And, we have warnings now of increased audits for small businesses, especially Sole Proprietorships, and anyone who has capital gains.

My husband, Richard, gets a call almost every single day from someone who has just gotten an IRS notice or just gone through an IRS audit. And, at the same time, my clients haven’t gotten audited. None of them.

If my firm prepared the return, or is able to advise the preparer before it is filed, NONE of the returns have gotten selected for audit. And, a lot of our people claim the real estate professional status. A lot of our people have businesses.

I was thinking about that difference this morning. Why are we getting such different results? The answer, I think, is because I blog and post about taxes every single day, I’m constantly searching and researching for new things to talk about. As a result, I stumble on things like the IRS handbook for audits of real estate investors and professionals. That’s how I developed the IRS Survival Guide for Real Estate Professionals. And then someone forwarded the IRS report due out December 2008. (I have a lot of contacts in media and through DC these days.) That’s when I spotted the new audit targets.

If you get a copy of the opponent’s play book ahead of time, you’ve got a much better chance of winning the game. And that’s what we’ve been able to do. We KNOW what the IRS is going to look for and we make sure it’s there. We never falsely prepare anything. We just do everything we can to make sure the returns are in compliance, especially when we know what they’re looking for.

I think it’s never been more dangerous to prepare your own return. If you don’t know this stuff, you’ll get audited. And audits can be very very costly.

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