An IRS Audit (Part IV)

Examples of records the IRS might request in an Audit (cont.)

  • Loan agreements – Include a copy of the original loan with the following:
    • Names of the borrowers
    • Location of the property
    • Financial institution making the loan
    • Amount borrowed
    • Terms (the number of months to pay)
    • Settlement sheet
    • If the loan was from an institution, include an end of tax year statement indicating interest paid
    • If the loan was not from an institution, provide a statement from the payee indicating the interest paid that year as well as the payee’s address and Social Security number
    • Provide a break-down of how you used the money
  • Logs or diaries – These might show the dates and locations of your travel as well as the business purpose and mileage. These might also show gambling winnings and losses as well as dates and locations. These might also show job-hunting activity and expenses.
  • Tickets – Label travel tickets with the business purpose for the trip and group them with other receipts from the same trip. Lottery tickets help provide proof of profit or loss.
  • Medical and Dental records
    • Medical savings account statements
    • A copy of a handbook or other statements showing benefit and reimbursement policies
    • Physician statements
    • Capital improvement records for medical purposes including appraisals of the property before and after the improvements
    • Contract for attendant care
  • Theft or loss documents
    • Insurance reports detailing the nature of the loss or damage
    • If not insured, copies of fire department or police reports on the loss, theft or accident
    • Photos or video showing the extent of the damage (if available)
    • Appraisal from a qualified adjustor showing fair market value of the property before and after as well as an estimate of the damage
    • Brief explanation of the loss
  • Employment documents – These might include uniform policies or dress codes, continued education requirements, W-2 reimbursement statements or policies.
  • Schedule K-1 – These are used to report each shareholder’s share of income, losses, deductions and credits when an S corporation files its annual tax return.

Next week additional information on the IRS Audit (IRS web site) (TTT 02/02/2021)