Having worked for Internal Revenue Service for 10 years and having been a Former IRS Instructor with the Internal Revenue Service there are a couple of acid tests a Revenue Officer / Agents will look at when working a taxpayer case in their inventory.
I should go as far to also tell you that when I was in my teaching mode at the IRS this was the first bit of instruction I would give the newbie Revenue Officers.
” Assume the taxpayers are lying. “ While this is a bit of an over statement on my part you should know that as a IRS Agent taxpayers on a regular basis never tell you the whole truth. While some taxpayers are as honest as the day is long, most are deceiving and you must dig for the truth.
Therefore going into each case these 3 acid tests are the fastest and quickest way to spot the liars and deceivers.
Three main tips:
1. Make sure the bank statements, the tax return, the taxpayers cost of living, and the financial statement all have of common thread of income. While there are many exceptions to this because of changing circumstances i.e. loss of jobs or life events, generally, the money you deposit in your bank needs to tie in to your current wages and your income information on your tax return. If this does not match up you can bet your last dollar IRS will dig into to this issue and find out if there may be hidden income. Also your cost of living should be in line with your wages. Exceptions exist such as you are borrowing money or living on savings.
2. IRS will pull credit reports to verify monthly payments you are making on other debt or assets. Many people who hide or deceive will by money order or cashiers checks. A smart IRS Agent will pull credit reports and verify your IRS financial statement with items found on your credit report.
3. IRS will check through credit reports for loan applications submitted to banks, car dealership or other financial institutions to verify income and assets. IRS will compare the financial statement you gave the financial institution to the financial statement you are giving IRS. It should match up, however it is rarely the case.
While this is not a comprehensive list, know this, IRS knows where to look for lies and deception and they will find it.
Always turn in a truthful financial statement to the IRS.
Anytime you deal with the IRS, it is always wise to seek professional counsel.
