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I am getting audited for claiming education credit for year 2014 for my son.  I claimed $1649.  I have for 1098-T showing $1190 for Tuition from the community college.  I claimed $459 for books and supplies for the whole year.  This is not unreasonable for have $460 for books.  They are asking for receipts.  We bought used books from someone we know. Is hand written receipt going to work?

Should I just mail-in the receipts?  Now that I am looking, I found around $700 for supplies.  (There was a TI graphing calculator, backpack etc)  Thinking of asking to pay me back.
 Don't they have anything better to do than to audit measly $400-$500?

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Seems like another case of OP not updating or closing the loop.

tuphat (Sep. 09, 2016 @ 8:56a) |

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You have receipts totaling over $1649? Just send all you have (more is better, in case some get rejected or something) and be done with it.

dayseedesi said:   Don't they have anything better to do than to audit measly $400-$500?Some audits are set off by red flags, others are random. Keeps the proletariat in check.

I wouldn't defend my own audit. Get a professional to do it.

king0fSpades said:   I wouldn't defend my own audit. Get a professional to do it.
  
That would be a waste of money in this situation.    

BrianGA is right.  All OP should have to do is mail them copies of his receipts.    Case closed.

 

Is it really an audit?
Chances are a computer just sent you a letter for further documentation.

duplicate

IMHO, if you have the documentation send it in.

And if a few receipts are lacking remember the Cohan rule--named after song and dance man George Cohan who beat the IRS a century ago and established the rule. Reasonable estimates are okay, per Cohan rule. http://www.unclefed.com/AuthorsRow/Daily/fwdgetaudited.html

By the way, Fred Daily has a couple of how to handle an audit books from Nolo Press. Well worth a look and maybe even a purchase. http://www.nolo.com/products/stand-up-to-the-irs-sirs.html?img=3...

OP - Don't be afraid to turn the tables on them. If you have the documentation, there is nothing wrong with claiming an extra refund.

Once I received CP-2000 asking for $75k in taxes, $15k in penalties and $5k in interest.
Took me a few months but when all said and done, I got CP21B notice announcing extra $109 refund instead.
I did not hire any attorney.

But it did give me a few sleepless nights.

ssgcinty said:   
Once I received CP-2000 asking for $75k in taxes, $15k in penalties and $5k in interest.

 

  how does that work

Ideally you would have documented the purchase knowing you need proof. Send them a letter with the book title, author, date of purchase, and seller's name. You could also send "proof" of cost by finding the book online and printing the page of used prices.

Make sure the things you have receipts are actually valid deductions though. A backpack is not. A graphing calculator is only if it's required for the class. It doesn't sound like you have receipts for the books themselves.

unimeg said:   Make sure the things you have receipts are actually valid deductions though. A backpack is not. A graphing calculator is only if it's required for the class. It doesn't sound like you have receipts for the books themselves.
  
Its a grey enough answer I would print off a receipt on a printer and get your friends that sold the books to sign it -- then sent a copy of ALL your receipts in to them.  As was said by ssgcinty its possible they will send you a small refund.  They will just apply all that they accept to the line number and it can go up OR down.

 

My two cents:  Send letter & receipts supporting the original return.  If you want to claim additional expenses, you will need to file an amended return, which will extend the statute of limitations & also increase your DIF score, such that other parts of your return may be examined.

P.S.   The "Cohan Rule" of using estimates is generally only useful in court, or where IRS case is at the Appeals level (and therefore may be headed to court).  Exam-level agents will likely scoff at such claims.

tuphat said:    DIF score, 
  green for this. from this blog, the IRS audit game sounds very similar to the PD traffic ticket game


  • ntrapment: Before reviewing the case, the Auditor may offer to settle for half of your claimed deductions. They are trained to make this offer for two reasons:

    • You may settle solely to avoid the hassle, but the IRS will interpret this as an implicit admission of guilt. Accordingly, they will audit you repeatedly throughout your life.
    • Following the case to completion will halve your tax obligation (at least). So the auditor doesn't sacrifice anything by making this offer.

  • Auditors Don't Want Cases With Taxpayers That Appeal: IRS agents select cases from a pool chosen by the DIF Score. "The auditor's performance is judged by the IRS based on the number of cases closed with the taxpayer's agreement." If you settle quickly and pay a fine, other agents will gladly audit you in the future. Your best deterrent is to fight for every deduction, let the process fully run its course, escalate it to a supervisor and use the appeals process because it makes you an unattractive Target for future years.
  • Always Appeal. (85% Settled With An Average 40% Reduction In Tax) Always appeal the Senior Auditor's decision. The appeals officer is 'judged by how many cases he or she settles with the taxper, rather than on backing up the original auditor's report.'
  • Post-Appeal. (Another 85% Are Settled Pre-Trial) Even after the appeals process, 85% of the post-appeals cases are closed before they get to trial. Why? The IRS' 'legal resources are scarce'.


http://cavqm.blogspot.com/2011/07/reverse-engineering-irs-dif-sc... 

ssgcinty said:   OP - Don't be afraid to turn the tables on them. If you have the documentation, there is nothing wrong with claiming an extra refund.

Once I received CP-2000 asking for $75k in taxes, $15k in penalties and $5k in interest.
Took me a few months but when all said and done, I got CP21B notice announcing extra $109 refund instead.
I did not hire any attorney.

But it did give me a few sleepless nights.

  
This is not true. If they change your taxes (either in good or bad direction) you're more likely to get audited in the future. Have them accept your taxes as submitted.

lostjake said:   
ssgcinty said:   OP - Don't be afraid to turn the tables on them. If you have the documentation, there is nothing wrong with claiming an extra refund.

Once I received CP-2000 asking for $75k in taxes, $15k in penalties and $5k in interest.
Took me a few months but when all said and done, I got CP21B notice announcing extra $109 refund instead.
I did not hire any attorney.

But it did give me a few sleepless nights.

  
This is not true. If they change your taxes (either in good or bad direction) you're more likely to get audited in the future. Have them accept your taxes as submitted.

  
This was 2009 return filed in Oct 2010.
Got CP2000 in Sep 2011.
Got it resolved in Apr 2012 with a slight decrease in taxes. (They were wrong on the ones that increased my taxes.  On the other hand, in the whole exercise, I found that I had forgotten to include a loss making trade.)
Touch wood but I have not been audited so far.

But you may be right - once they identify you as "sloppy" or "wrong", you become an attractive Target.

 

Except you have never been required to claim everything you are entitled to -- I have left off things in the past that I felt were "marginal." The fact that they are asking for the documents means you can send in those marginal items and let them decide.

I can see where they would increase your audit chance if they proved you were claiming things you were not entitled to, but not the reverse -- it could cost them every time they audit you.

I have had a CP2000, and I ended up paying $1600 in a misunderstanding about how to claim excess costs. I was never audited again, even though I had used the same methodology for several years. You would think I had a higher chance, but they never came back. I think the odds of getting a CP are low enough that even increasing them is not inherently risky.

So is all communication with IRS auditor by mail or is there a way to talk to them on phone?

I was recently sent a bill for 2013 state income tax that I owed, less than $100, for $900 worth of 414H income my CPA forgot to include on the state return because it's not federally taxable income.

I could have fought it and taken an $1100 deduction I failed to take on the original return, but after a couple weeks of letting my hatred of the entire concept of taxation interfere with my sleep, I just paid them $69.

I don't think I'm more likely to get audited in the future for this.

lostjake said:   
ssgcinty said:   OP - Don't be afraid to turn the tables on them. If you have the documentation, there is nothing wrong with claiming an extra refund.

Once I received CP-2000 asking for $75k in taxes, $15k in penalties and $5k in interest.
Took me a few months but when all said and done, I got CP21B notice announcing extra $109 refund instead.
I did not hire any attorney.

But it did give me a few sleepless nights.

  
This is not true. If they change your taxes (either in good or bad direction) you're more likely to get audited in the future. Have them accept your taxes as submitted.
 

  
Why do you say that?

 

jerosen said:   
lostjake said:   
ssgcinty said:   OP - Don't be afraid to turn the tables on them. If you have the documentation, there is nothing wrong with claiming an extra refund.

Once I received CP-2000 asking for $75k in taxes, $15k in penalties and $5k in interest.
Took me a few months but when all said and done, I got CP21B notice announcing extra $109 refund instead.
I did not hire any attorney.

But it did give me a few sleepless nights.

  
This is not true. If they change your taxes (either in good or bad direction) you're more likely to get audited in the future. Have them accept your taxes as submitted.

  
Why do you say that?
 

  
Logically, any change means you didn't keep clean records.  You either forgot something or estimated something.  It's an indication that you may not always have the documentation to defend the details in your return.

I'm not a lawyer or accountant.  Just a taxpayer who reads a lot.

This is not an audit, period.

unimeg said:   Make sure the things you have receipts are actually valid deductions though. A backpack is not. A graphing calculator is only if it's required for the class. It doesn't sound like you have receipts for the books themselves.
  Why is backpack not?  It falls under supplies. If you can't deduct pen, pencils, backpack, then IRS would gave called books only. 
A project is required by a class. If a student buy some supplies like paint, etc to complete it, it is deductible. Now OP has to get a letter from every instructor to prove what was a requirement and what was discretion?

king0fSpades said:   
unimeg said:   Make sure the things you have receipts are actually valid deductions though. A backpack is not. A graphing calculator is only if it's required for the class. It doesn't sound like you have receipts for the books themselves.
  Why is backpack not?  It falls under supplies. If you can't deduct pen, pencils, backpack, then IRS would gave called books only. 
A project is required by a class. If a student buy some supplies like paint, etc to complete it, it is deductible. Now OP has to get a letter from every instructor to prove what was a requirement and what was discretion?

  You sure about that?

Only those books, fees and similar expenses that you pay to the school and that the school requires you to pay directly to it are deductible. 

ZenNUTS said:   
king0fSpades said:   
unimeg said:   Make sure the things you have receipts are actually valid deductions though. A backpack is not. A graphing calculator is only if it's required for the class. It doesn't sound like you have receipts for the books themselves.
  Why is backpack not?  It falls under supplies. If you can't deduct pen, pencils, backpack, then IRS would gave called books only. 
A project is required by a class. If a student buy some supplies like paint, etc to complete it, it is deductible. Now OP has to get a letter from every instructor to prove what was a requirement and what was discretion?

  You sure about that?

Only those books, fees and similar expenses that you pay to the school and that the school requires you to pay directly to it are deductible. 

  I am sure 100% that books don't have to be bought from school. No question about it. 

Books that's required, yes. Backpack, pens, and pencils, no.

Supplies needed for a course of study.  That means going for a degree.  If one wants to waste their time claiming pens, pencils, backpack, they can.  

faw169 said:   This is not an audit, period.
  The letter that I received:

"We are auditing your 2014 Federal Tax return..........  There is a checkbox and next to it "Education Credit"

 

rufflesinc said:   So is all communication with IRS auditor by mail or is there a way to talk to them on phone?
  By mail.

gatzdon said:   
jerosen said:   
lostjake said:   
ssgcinty said:   OP - Don't be afraid to turn the tables on them. If you have the documentation, there is nothing wrong with claiming an extra refund.

Once I received CP-2000 asking for $75k in taxes, $15k in penalties and $5k in interest.
Took me a few months but when all said and done, I got CP21B notice announcing extra $109 refund instead.
I did not hire any attorney.

But it did give me a few sleepless nights.

  
This is not true. If they change your taxes (either in good or bad direction) you're more likely to get audited in the future. Have them accept your taxes as submitted.

  
Why do you say that?

  
Logically, any change means you didn't keep clean records.  You either forgot something or estimated something.  It's an indication that you may not always have the documentation to defend the details in your return.

I'm not a lawyer or accountant.  Just a taxpayer who reads a lot.

  

But is that an actual IRS rule or practice?

I don't see the IRS documenting their specific rules for audit practices.     So is this just someones theory?
 

Whether or not you can count books and supplies as an education expense depends on which credit you're taking and how you bought them.

With the American opportunity tax credit you can claim supplies generally. But with Lifetime learning credit the supplies have to be bought through the college.

Send them the receipts. Separately mail them all of your dryer lint using the return address of someone you dislike.

OP, which credit did you claim exactly?

I think we're all assuming its AOTC since that fits a kid in CC. But was it LLC?..

jerosen said:   OP, which credit did you claim exactly?

I think we're all assuming its AOTC since that fits a kid in CC. But was it LLC?..

  AOTC. Turbo Tax automatically picked it for me. 

Make sure you get intimate with the wording/technicalities within the official IRS publications, specifically publication 970:

https://www.irs.gov/publications/

https://www.irs.gov/pub/irs-pdf/p970.pdf

I have four kids in college simultaneously. They did the same with us regarding our 2014 tax return, and the letter I received in April stated we owed money as well. Ours was based upon the IRS taxing the $$$ for savings bonds cashed and the 529 plan money we had pulled out to use for their educational expenses. We sent all receipts we had which totaled to a slightly higher amount than we had originally stated in our return. The more documentation/receipts you send the better. They stated we owed 8,200 as the money used was now being calculated as income (plus they tacked on fees and interest).  My husband also wrote a cover letter using the tax codes and individually addressed each point made in their initial letter to us. Once they reviewed our documentation they responded that the amount we owed was reduced to zero. Your situation was different than mine, but the point being is provide as much allowable documentation/receipts as you can (plus extra if you have it) and follow the IRS code to the letter.

cathwats said:   I have four kids in college simultaneously. They did the same with us regarding our 2014 tax return, and the letter I received in April stated we owed money as well. Ours was based upon the IRS taxing the $$$ for savings bonds cashed and the 529 plan money we had pulled out to use for their educational expenses. We sent all receipts we had which totaled to a slightly higher amount than we had originally stated in our return. The more documentation/receipts you send the better. They stated we owed 8,200 as the money used was now being calculated as income (plus they tacked on fees and interest).  My husband also wrote a cover letter using the tax codes and individually addressed each point made in their initial letter to us. Once they reviewed our documentation they responded that the amount we owed was reduced to zero. Your situation was different than mine, but the point being is provide as much allowable documentation/receipts as you can (plus extra if you have it) and follow the IRS code to the letter.
  Thanks 

You collect all the receipts and consult with any good IRS tax attorney near you. I am sure you can get the right advice.

Skipping 4 Messages...
Seems like another case of OP not updating or closing the loop.



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