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Business and Personal Records During an IRS Audit

Posted by Juda Gabaie | Aug 18, 2021 | 0 Comments

Being audited can be a stressful experience, especially if this is your first audit. Whether you're facing a personal or a business audit, you probably want to know what to expect and how you can prepare. So, in this article, we'll discuss the business and personal records the IRS may examine during your audit.

If the IRS selects you or your business for an audit, they will send you a list of requested documents. This request can include documents such as:

  • Receipts: You should produce receipts to show any expenses you deduct, whether business or personal, including charitable contributions, receipts for business travel, and other deductible expenses.
  • Bills: To prove what you spent your money on, you can produce bills or credit card and checking statements showing payments for deductible expenses.
  • Canceled Checks: You should hold on to any canceled checks for deductible expenses such as fees from a home sale, renovations, nondeductible contributions to an IRA, alimony payments, charitable contributions, and tax payments. For business checks, group these with the bills and any employer reimbursements.
  • Employee Documents: You should keep continuing education requirements, dress codes, and W-2 reimbursement policies for personal taxes. Businesses should maintain payroll and expense reimbursement documents, employer tax payments, and contributions for employee benefits and retirement accounts.
  • Legal Papers: For legal losses or gains, you should save legal documents related to the case, the credit or deduction, and how it relates to your business if applicable. You should also keep divorce and settlement agreements, tax preparation documents and advice, property acquisition documents, and any civil or criminal defense papers.
  • Loan Agreements: If you have loan agreements, you should keep an original copy of the loan with all the pertinent financial information, the borrower, and the financial institution.
  • Trip Logs: If you claim business travel, you should keep trip logs. For expenses related to looking for a new job, you should keep job-hunting activities along with the associated expenses. If you have personal gambling winnings, you should maintain a log of these as well.
  • Medical and Dental Records: Documents you should save include medical savings account documents, medical provider statements, and insurance reimbursement documents.
  • Theft or Loss Documents: You should save insurance and police reports documenting the loss, photos of videos showing the damage, appraisal showing fair market value and amount of damage, and brief explanations of each loss.
  • Tickets for Business Travel: You should save tickets from business travel or job-hunting travel, labeled with their purpose.
  • Schedule K-1: You'll need Schedule K-1 forms used to report each shareholder's income, losses, and deductions when filing annual returns for an S corporation.

Hire an Experienced Tax Attorney

If you're facing an IRS audit or other investigation, you need help from skilled tax professionals. The attorneys at Gabaie & Associates, LLC have decades of experience offering guidance and defense to clients with complex tax problems and IRS investigations. Contact Gabaie & Associates, LLC online for a free consultation or call them at 410-358-1300.

About the Author

Juda Gabaie

Juda Gabaie Esq. has dedicated his career in defending clients nationwide to resolve tax disputes before the Internal Revenue Service and the state taxing agencies. Juda has represented clients before the US Tax Court, Maryland Tax Court, and Comptroller of MD hearing compliance. As an adjunct prof...


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