IRS Audit w/ IRS Attorney or fight it out in Tax Court?
Question by Rich: IRS Audit w/ IRS Attorney or fight it out in Tax Court?
I’m currently at the IRS attorney “disclosure” phase of an upcoming IRS Tax Court appearance. The IRS’ attorneys want to settle with me and disregard all of my Schedule A deductions. I cannot get a letter of reimbursement policy from a previous employer (nor can the attorneys). Would you go continue on to Tax Court and try to fight it out there, or just accept the offer from the IRS’ attorneys to settle? There is ZERO chance I’ll get anything resembling a letter or policy from the previous employer and is it worth fighting for my schedule A deductions without it???
Thank you!
Best answer:
Answer by Judy
Since employee expenses that are reimbursable are not deductible whether or not they’re actually reimbursed, if that’s the issue and you can’t get the statement from the employer you’re going to lose on that one, so probably not worth the extra time, expense and aggravation of going to tax court on it.
What do you think? Answer below!
Filed under Tax Attorney by on Oct 27th, 2010. Comment. 
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Comments on IRS Audit w/ IRS Attorney or fight it out in Tax Court?
If your case hinges upon that policy letter and you can’t get it, don’t waste time and money fighting it. IF you can’t prove your position you will lose in Tax Court.
If you have proof of any sort, such as a copy of the employee manual that spells out what is reimbursable and what is not, or copies of expense report claims where the items that you are claiming on Form 2106 were denied by the employer would help your case and make it worthwhile. In fact, that would probably convince the IRS to drop the case on their end.
Tip: Always keep complete copies of expense reports and all receipts and copies of any checks or extracts of ACH deposits to your account. Even if the employer won’t give you a copy of the report with the denied items annotated, any differences between what you claimed and what you were paid are fairly easy to identify in most cases. And if a tax-deductible item isn’t reimbursed as a matter of company policy, always claim it anyway and let them deny it as that substantiates their policy.
Also try contacting old co-workers and see if they kept any copies.
Even if you can prove you were not on a reimbursable/accountable plan, you will still have hurdles.
For example, it’s virutally impossible to write off a cell phone or a computer. For travel, food requires an overnight trip and you must have hotel receipts. Per Diem isn’t a magic cureall for the schedule A.
Not receiving this letter of policy should only jeopardize your deductions for employee business expenses. They should not deny your other Scheduled A deductions, such as real estate taxes, mortgage interest, contributions to charity, etc.
Once this moves into court, can’t you subpoena the employer?
You have the right to have a subpoena issued to your ex-employer