Reply To: My First Audit

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James Wade


So I have done the ground work to prepare for my first audit (I grilled the owner about how their business operates and their books and records). Self-prepared tax return, if that helps put this into perspective.

Some items claimed on the return are estimates (though they appear to be estimates of actual amounts paid). In that year, father was ill and lived with couple; couple did not keep great records to begin with and turmoil of the year exacerbated the problem. Then tax time comes and so they put together a return as best they could.

I am sure I am not the only one with audit clients like this. How do you respond to IRS questions about books and records without saying, yeah my clients just winged it. I am thinking of saying that the clients prepared the return using both information in their accounting software as well as estimates for some expenses on which they lost or misplaced those particular records. These estimates were based on prior amounts paid for such expenses.

The difficult area is auto expense as I know they don’t have a mileage log and so we are going to have to see if it is possible to get other contemporaneous records to support something.

Thank you in advance!

Jim Wade