Investor Forum

Try Jim Cramer's Action Alerts PLUS
CLICK HERE NOW

How to Play the IRS Audit Game

04/14/05 - 07:17 AM EDT

Tracy Byrnes

But that doesn't mean that any or all of your deductions will be lost. It just might mean that you'll need to pony up some documentation to satisfy Uncle Sam's curiosity.

Be particularly careful about your home office deduction. Again, there is a lot of wiggle room here, so this is a hot item in the IRS offices. Be sure to read Publication 587 -- Business Use of Your Home Office to make sure you get everything right.

What If You Are Audited?

Don't panic. Again, it doesn't necessarily mean you did anything wrong. It just might mean that the IRS needs some documentation to satisfy its curiosity.

But the worst thing you can do is ignore it, says Perlman. Immediately contact the IRS agent who sent you the letter. Then do what you have to. Odds are good that you made a mistake. In that case, just send the money you owe and be done with it.

If you are selected for a face-to-face audit, the best thing you can do is get someone to represent you, says Perlman. So get a CPA, a tax attorney or an enrolled agent to help you. Let that professional deal with the IRS alone and negotiate your issues. Stay home! The last thing you need is to get all riled up and lose your temper in an IRS office. Let the pro do all the talking.

Note that if you don't have the money to hire a professional, go to the IRS Web site and check out the low-income-taxpayer clinics. There are attorneys out there who are willing to help people who are having problems with the IRS and will work out a fee with you based on what you can afford.

So in these last few hours of trying to get your return to look, well, "pretty," be sure that whatever you report has the documentation to support it.

Well, I hope we made your tax season a little less painful. It's over!

Now how about that cocktail?

1 2
» Next

Investor Forum


04/13/05
Deductions You Shouldn't Skip

Don't overlook these frequently missed items that can lower your tax bill.


04/07/05
Avoid Mistakes in Last-Minute Tax Prep

Simple errors or omissions can cause delays in processing, not to mention trigger audits.


04/05/05
Don't Write Off a Tax Extension

More taxpayers are seeking delays in filing their returns, but you still have to pay by the rules.



08/05/08
Three Internet Stocks That Could Double

These forgotten Internet stocks are being accumulated by hedge funds.


08/15/08
The Five Dumbest Things on Wall Street

Raspberries for Apple; You'll be sorry, UBS; Fortress or Fort Knox? Wholly unappetizing Foods; give Liberty AOL or give them...


08/15/08
McCain Fund-Raising Picks Up

The GOP presidential candidate raised $27 million in July.


08/15/08
Cash-Back Cards Aren't Money in the Bank

Some credit and debit cards give you some cash back on purchases. But you need to manage it well to benefit from it.


Your Recent Quotes: Quote Up0 | Quote Down0
Dow S&P 500 NASDAQ
Oil*
Gold
10 Yr
0.00%
%
%
%
Data delayed 20 min
Sign up for our FREE newsletters now. See All

  • Cramer's Daily Booyah!
  • Before the Bell

Premium Stock Ideas
Access Action Alerts Plus to find out Cramer’s latest picks now!