The title of IRS Form 886A is "Explanation of Items". Since the purpose of Form 886A is to "explain" something, the IRS uses it for many various reasons. Most often, Form 886A is used to request information from you during an audit or explain proposed adjustments in an audit. This form is extremely important because the IRS will want their questions answered by you!
You will need to provide more than just a few cancelled checks to the government. Each item of your return being questioned by the IRS must be proven with specificity & in the proper format or you will be rejected. You need to get organized & get legal advice.
But, only you can effectively gather your documents because only you have authority & control over the documents. It is less expensive & more efficient for you to prepare your own files. So, our attorneys have designed the Audit Defense Program to teach you how to gather & prepare your documents & evidence. Then, the Mr. Hopkins can better advocate for you!
Steps for Form 886A
The number of documents the IRS requests from you is often far more than needed to prove your case. They are "fishing" for more information. To protect you, our Audit Defense Program shows you exactly what to give them & what to say - for every issue!
The IRS will review your "Wage & Income Transcripts", your bank account deposits & your lifestyle to determine the accuracy of your reported income. The Wage & Income Transcripts are all third party documents filed with the IRS on you, such as Employers, Banks, & Lenders. You should obtain a copy of these documents from the Agent or by contacting the IRS.
The IRS will declare that all your bank and other deposits are income unless you can prove otherwise. This takes some effort to prove with proper documentation. So, an entire section of the Audit Defense Program is dedicated to "How to Prove a Deposit is not Income".
The IRS will usually ask you to provide a defined series of various documents they expect you to possess, such as Bank Statements, Tax Returns & Credit Card Statements for an entire year. For instance, they will often ask for ALL your bank statements for a series of years (& they may issue a Summons if you fail to comply). You can easily respond to these requests by using Step 3 - Key Document Requests in the TaxHelp Audit Defense Program.
Also, the IRS will look at your personal expenses & assets to determine if your income supports your lifestyle.
But, typically, the IRS disputes your income by sending you Return Error Notices (See Return Errors). In an Audit the biggest issue is when the IRS denies you proper deductions.
Often, the IRS will use Form 886A to reject insufficient or improperly organized documents & offer very little explanation for why or how you can correct it. The IRS will not (& by law, cannot) give you legal advice or tell you how to arrange your records. Yet, you are required to prove your case entirely.
You can't just give the IRS a pile of receipts or even an accounting software program. You must gather titles, vital records, employment records, bank statements, purchase documents, court & public records, etc., to prove your case. If your records are not arranged correctly or the evidence is insufficient, the IRS will reject your deductions. They will also likely impose a "negligent record-keeping penalty" as well as the "accuracy-related penalty".
So, pay close attention to the lines of your return or Schedule being questioned. These must be proven with full & exact specificity. Our Audit Defense Programs give you tax attorney guidance for every issue on every line of all common IRS Forms or Schedules. We help you find every bit of evidence necessary to fight the IRS!
To see how the TaxHelpPrograms work see our Advantages page!
You may fear an IRS audit because you didn't keep your records or your records are lost or unavailable. However, unless you only used cash, we can re-create your bank & credit card records. Also, even if cash was used, affidavits can be obtained or we can use industry standards to arrive at a reasonable figure. See TaxHelpLaw - Lost Documents.
Focus on Tasks
Please look carefully at your Form 886A. If the IRS is requesting information related to your Schedule A, Schedule D, Schedule B or the Form 1040, please follow the Individual Program Prep Steps, or each separately.
If the IRS requests are for Schedule C, Form 2106, Schedule E or the Form 4797, please follow the Business Program Prep Steps! In any event, to get your records in order & respond correctly please follow the TaxHelp Prep Steps for victory!!
Please also see the TaxHelp Blog series, "Audit Issues".
IRS Mailing Address:
The mailing address to send your response to the IRS is the address shown in the initial Letter 3572, Letter 2205 or Letter 2202 you have received. The address should also be on the Form 4564 or any other letter you received about this particular audit.
IRS requests documents with Form 886A: