The IRS uses Form 4564 to request information from you in an audit. The Form is called an Information Document Request (IDR). There are several versions of the Form 4564 so yours may not be exactly the same as this example, nor will the IRS requests be the same. The questions the IRS asks can be intrusive. They imply that you have to supply a mountain of evidence & come in for questioning.
You must ignore the IRS requests for expansive disclosure. Instead, you should pay close attention to what lines on the return are being questioned and prove your case in the most direct, easiest & cheapest way. The IRS won't show you how to present your evidence. Instead, they will continue to ask more intrusive questions. Look at how flimsy are the IRS "Tips" for preparing for an audit.
You must provide the unquestionable evidence of each item being investigated but you're not required to agree to open-ended questioning by the IRS. In this way, you will narrow down the issues & then attack those issues directly.
Steps for IRS Audits
Form 4564 is usually used for more serious investigations and they often ask for more information than they really need from you. But, you must prove your case with the least effort and most direct evidence as possible.
Look carefully at the IRS questions and the lines of your return being examined. Perhaps attorney guidance or representation is best for you. After all, an IRS audit is a legal process against you. You must respond correctly to the IRS or be rejected.
Essentially, the IRS will look at all your bank account information, your business deductions & expenses, your Wage & Income Transcripts & your lifestyle to determine if you accurately accounted for your income & expenses on your tax return.
Call the Agent or the IRS at 1-800-829-1040 & request your "Wage & Income Transcripts". These documents contain all 3rd party records sent to the IRS on you. Your spouse (& children, perhaps) should order their transcripts as well. You can then verify the entries on your return.
The IRS will declare all income in your bank account to be income unless you prove otherwise. You have to track all inter-bank transfers & other deposits that are not income, such as loans, inheritances, gifts, etc. Fortunately, our TaxHelp Audit Defense Program has an entire section devoted to "How to Prove a Deposit is Not Income", which shows you specifically what to get & say to the IRS!
The IRS will scrutinize your assets & lifestyle to see if it corresponds with the income you reported.
More often, the IRS rejects your deductions because they are not in the proper order or insufficient. And, they often impose an additional negligent record-keeping penalty and/or accuracy-related penalty as well! (See IRS Notice 746)
The IRS is not allowed to give you legal advice or tell you how to arrange your records. You must give the IRS evidence of titles, insurance, bank statements, purchase documents, vital records, court records, etc., not just a pile of receipts or even an accounting software program. And, the evidence must be arranged in exactly the manner required.
Don't let them intimidate you. Keep a direct course proving your case, be extremely thorough with your documents, bring up new issues in your favor & narrow down the IRS inquiry with procedural barriers.
You can prepare the documents or you can hire a CPA, bookkeeper or attorney for a cost. But, because the process can be tedious, uncertain & expensive we designed the TaxHelp Audit Defense Program to show you exactly what to do & say to the IRS for every issue.
Requests for Information
The IRS will ask for general documents from you, such as several years' worth of Bank & Credit Card Statements & Tax Returns. You can easily gather & organize these documents by using Step 3 - Key Document Requests in the Audit Defense Program.
However, the IRS will also ask for specific documents from you, depending on which line of your return is being questioned. They will ask for Insurance Policies, Titles to Property, Court & County Records, Appraisal & Purchase Documents, etc. to prove various aspects of your tax return. Respond to these requests by using Step 5 - Prep Steps in the Audit Defense Program.
If you want to save money & prepare for the IRS, a TaxHelp Audit Defense membership for total audit defense & preparation tools is available. You are shown with text, audio & video how to prepare all your files. Tax attorney strategies are shown and IRS traps are fully explained.
It is wise to self-prepare your files. You understand your business more than anyone and can get the files & tabulate the expenses more efficiently.
To see how the TaxHelpPrograms work see our Advantages page!
Steps for Form 4564
Please look carefully at your Form 4564. If the IRS questions relate to your Schedule C, Form 2106 or Schedule E, then please follow the TaxHelp Business Edition Prep Steps.
If the IRS questions relate to your Form 1040, Schedule A, Schedule B or Schedule D please follow the TaxHelp Individual Edition Prep Steps. With both, you get the full TaxHelp program and the Form 1040. The TaxHelp Audit program gets you prepared & saves you time!!
While you use the TaxHelp Audit Defense Program you can also seek legal advice from the tax audit attorney at TaxHelpLaw, J. David Hopkins, JD, LLM. To advise you of the documents we need to review we have designed Prep Steps to prepare you for our confidential attorney meeting. We will create a specialized Action Plan to handle this IRS problem for the least cost.
Often, people fear an audit because their records are lost or unavailable. However, unless you were using solely cash, bank records & credit card records can be re-created by contacting the provider. Even if cash was used, we can get affidavits or use industry standards to arrive at a reasonable figure. See Lost Documents.
But, even if you do-it-yourself you still should get legal advice. To prepare you for the most productive attorney meeting, we have designed Prep Steps to follow. You save time & money by gathering the documents for the attorney to review. Mr. Hopkins will prepare an Action Plan with tactics for your specific case.
Please also see the TaxHelp Blog series, "Audit Issues".