The IRS Audit Blog

Archive for April, 2008

Lease Up/Lease Down (Jan. 31 – Feb. 6): Exploring Possibilities: Ford Adding 1,200 Jobs in Chicago

CoStar compiles news of corporate expansions, relocations, extensions, closures, layoffs, lease cancellations and mergers in the weekly Lease Up/Lease Down news report, a concise read keeping you updated on major corporate moves affecting commercial…

Phoenix, Arizona: Tax Day Tea Party 2009

Question: I Lost my Refund Check!!!!?

I lost my irs refund check and contacted the irs. I was just wandering if this happened to anybody and how did it take to get a replacement. I was told 6 weeks. Thanks!

Answer: It will takes any where from 6-12 weeks, because IRS must make sure the check has not been cashed. IRS will put a stop payment on your lost check and wait to make sure it never was cashed and then will finally issue you a check.

New tax credits could boost your tax refund

You might get a bigger tax refund than you think. At least one Knoxville account says he’s seen the average tax return increase this year, sometimes by more than a thousand dollars.

Tax Tips: e-File and Direct Deposit – Jan 2010

Super Bowl winnings are taxable income

Placed a bet on the big game? You’re not alone, but most winners ignore the tax responsibilities.

Question: Is it common for the IRS to audit returns to verify cost basis on Sch D?

Since IRS does not receive cost basis data from mutual funds, do they often ask for documentation for cost basis? And do they often audit individuals for this purpose?

Answer: Due to the tax returns volumne our district (13,000) does, we have a few audit returns each year. For the past 10 years, I’ve been assisting every now and then (as a tax professional).

Okay I will answer your questions first:

Is it common for the IRS to audit returns to verify cost basis on Sch D? Do they often ask for documentation for cost basis?

That will be no (for cost basis). They never ask for it.

And do they often audit individuals for this purpose?

No. Only when the clients fail to provide us with 1099B, we did not report the clients sales of stocks, mutual funds, etc. on the tax return.

Now, here is the serious issue:

http://www.irs.gov/businesses/small/article/0,,id=98575,00.html

What is the burden of proof?
The responsibility to prove entries, deductions, and statements made on your tax returns is known as the burden of proof. You must be able to prove (substantiate) certain elements of expenses to deduct them. Generally, taxpayers meet their burden of proof by having the information and receipts (where needed) for the expenses. You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement. You generally must have documentary evidence.

As a financial advisor, it is not my responsibility to keep these record. Our financial institution do send statement to our clients. However, you pay us commission. We got to provide that for you. If your broker/dealer is an idiot and fail to provide you with cost basis, please tell your broker and do switch to another firm. In the mean time, you can call the mutual fund company themselves. They do keep a record of you. They want to have you forever.

Why do I request you provide cost basis? When you sale these next time, you would continue to have trouble filing your tax return. Without knowing, you may have capital losses (via cost averaging into the market/mutual fund).

Paper Records: What to toss, what to keep

Worried about pitching documents that they may need at some point, many people decorate a spare bedroom with boxes or large file cabinets stuffed with old bank statements, tax returns and pay stubs. (Okay, if the stash isn’t in a spare bedroom, perhaps it resides in the attic, basement or garage.)

Candidates face voters at forum

The election for the vacant District 40 house seat is quickly approaching, and candidates are getting the word out on where they stand on the issues. Last week, the seven candidates met for a forum.