Records Needed for an IRS Audit in California

The words “IRS audit” are enough to trigger panic in any San Francisco taxpayer. While the prospect of an audit can be scary, audits are actually very common and not, necessarily, a reason to panic — especially when you have all the proper records and documentation in place. Let’s look at the records and documents Californians should keep in case of an IRS audit.

First off, if the IRS has notified you of its intention to audit you, they will ask you to present specific documents that support the income, credits or deductions you claimed on your return. These are the same documents you would have used to prepare your tax return. Additionally, the IRS will tell you how and when to present your records. If they are conducting your audit by mail, the address to mail the requested records will be on your notice. If the audit is in person, you will be asked to bring the records with you. 

Remember that the document itself is just part of the inquiry. You will likely also need to write out the circumstances surrounding the document. Additionally, do not panic if you do not have certain documents. There are steps you can take to address the missing documents effectively and ensure a smoother IRS audit process. 

Here is what the IRS commonly requests during an audit:

  • Receipts – Present these by date with notes on what they were for and how the receipt relates to your business. 
  • Bills – Include the name of the person or organization receiving payment, the type of service and the dates you paid them.
  • Canceled checks – Group these with copies of the bills they paid and any applicable employer reimbursement.
  • Legal papers – Include a description of what the case was about, when it happened and how it relates to your business, credit or deduction. Examples include: tax preparation or advice, property acquisition, and criminal or civil defense papers. 
  • Loan agreements – The following information should also be included: names of the borrowers, location of the property, financial institution making the loan, amount borrowed, terms (the number of months to pay), settlement sheet, and a break-down of how you used the money.
  • Logs or diaries – These might show the dates and locations of your travel as well as the business purpose and mileage, and job-hunting activity and expenses.
  • Tickets – Label travel tickets with the business purpose for the trip and group them with other receipts from the same trip. 
  • Medical and dental records — These may include medical savings account statements, a copy of a handbook or other statements showing benefit and reimbursement policies, physician statements, and contract for attendant care.
  • Theft or loss documents — Insurance reports detailing the nature of the loss or damage, photos or video showing the extent of the damage (if available), appraisal from a qualified adjustor showing fair market value of the property before and after as well as an estimate of the damage, brief explanation of the loss.
  • Employment documents – These may include uniform policies or dress codes, continued education requirements, W-2 reimbursement statements or policies.
  • Schedule K-1 – These are used to report each shareholder’s share of income, losses, deductions and credits when an S corporation files its annual tax return.

Whatever documents the IRS requests of you, it’s always best to work with an experienced tax professional or attorney who can make sure you are providing the right documents with the proper explanations. This will help ensure your San Francisco business is protected, and save you time, money and stress. 

Allison Soares is a partner and tax attorney at Vanst Law LLP. It doesn’t matter the issue: audits, collections, appeals, international disclosures, grumpy people— Allison enjoys fixing problems. In addition to her legal work, she has worked in accounting and utilizes that knowledge to her advantage while handling cases involving EDD audits from San Francisco to San Diego. 

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Allison Soares

Allison Soares, a renowned tax attorney, excels in representing clients before the IRS, FTB, EDD, and CDTFA. With a Bachelor of Arts in Finance from the University of Wisconsin, Milwaukee, and a transformative teaching stint in Brazil, Allison’s diverse background enriches her legal expertise. She pursued law at St. Thomas University School of Law, Miami, complementing it with an MBA in accounting and forensic accounting. Further honing her skills, she obtained a Master of Laws in Taxation from the University of San Diego School of Law. As an adjunct professor at San Diego State University, Allison imparts her knowledge in tax procedures, practice, and ethics. Her accolades include being named Best of the Bar by the San Diego Business Journal and multiple Super Lawyer recognitions. Committed to community service, she volunteers with Forever Balboa Park and Friends of Balboa Park. Allison’s authoritative contributions in tax law are showcased through her publications and speaking engagements.

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