Will I be audited?

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Ddd7651
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Will I be audited?

Post by Ddd7651 » Mon Nov 11, 2019 12:23 pm

What are my chances of being audited this year or should I worry? Joint Income $240k+

I plan to combine 5 years of charitable giving due to the new tax laws. Specifically, I plan to put 56k into a Donor Advised Fund and give out 14k this year, for a total of 70k of cash giving this year. The goal is of course to pull from the DAF for the next 4 years to give and taking a big hit now essentially getting a tax write-off for projected charitable giving for the future.

If the chance of being audited goes up, I might plan to purchase audit insurance while doing my own taxes which is the reason for my asking. I might let someone else do the grunt work though it is likely I will just be providing receipts from Fidelity and current year organizations. That is simple to do by myself also but didn't know if I was missing something that a professional might need to handle.

Thoughts? Does this sound as straightforward as I think on tax writeoffs and benefits?

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8foot7
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Re: Will I be audited?

Post by 8foot7 » Mon Nov 11, 2019 12:31 pm

Your chance of being audited in person is so low as to be non-existent. Your chance of a receiving a mail audit is higher but not significantly so. If everything you are doing is aboveboard and easily documented via receipts and letters, then audit insurance is a waste.

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ResearchMed
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Re: Will I be audited?

Post by ResearchMed » Mon Nov 11, 2019 12:32 pm

Ddd7651 wrote:
Mon Nov 11, 2019 12:23 pm
What are my chances of being audited this year or should I worry? Joint Income $240k+

I plan to combine 5 years of charitable giving due to the new tax laws. Specifically, I plan to put 56k into a Donor Advised Fund and give out 14k this year, for a total of 70k of cash giving this year. The goal is of course to pull from the DAF for the next 4 years to give and taking a big hit now essentially getting a tax write-off for projected charitable giving for the future.

If the chance of being audited goes up, I might plan to purchase audit insurance while doing my own taxes which is the reason for my asking. I might let someone else do the grunt work though it is likely I will just be providing receipts from Fidelity and current year organizations. That is simple to do by myself also but didn't know if I was missing something that a professional might need to handle.

Thoughts? Does this sound as straightforward as I think on tax writeoffs and benefits?
Are your "14k" figures (and multiples) because you think that's the annual limit? If so, it's now $15k pp/yr.
This may or may not affect your planning, obviously.

Audit insurance??
How complex are your returns, and how uncertain are you that they are correct?

RM
This signature is a placebo. You are in the control group.

Rus In Urbe
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Re: Will I be audited?

Post by Rus In Urbe » Mon Nov 11, 2019 12:36 pm

We established a DAF (at Vanguard) and give around that amount each year to offset taxes. The IRS gets reports from a Vanguard, sees the money through transfers, knows that once that money leaves your account and goes into the DAF it can't come out again and it is an immediate charitable contribution in full, etc.

For us, so far, no hint of an audit.

Just be sure you follow the rules, of course: The tax deductibility limits of contributions to donor- advised funds are the same as other 501(c)(3) public charities. A contribution of cash is deductible up to 60% of a donor's adjusted gross income (AGI) and a contribution of an appreciated asset or investment is deductible up to 30% of a donor's AGI. Also, file a tax form about the DAF (info on that is on the Vanguard site).

The IRS (largely for political reasons I can't go into here on this board) is vastly underfunded. INFO: The IRS audited almost 1.0 million tax returns, approximately 0.5 percent of all returns filed in Calendar Year 2017. So your chances of being audited are pretty small.

Unless you have some other factor that draws the IRS's attention, I doubt contributing to a DAF will bring on an audit.

But perhaps other Bogleheads (perhaps who have worked for the the IRS) can enlighten us on the factors that put you at higher audit risk.....

Good luck to you and congratulations on your philanthropic activities! Rus :beer
I'd like to live as a poor man with lots of money. ~Pablo Picasso

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Ddd7651
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Re: Will I be audited?

Post by Ddd7651 » Mon Nov 11, 2019 12:41 pm

ResearchMed wrote:
Mon Nov 11, 2019 12:32 pm
Ddd7651 wrote:
Mon Nov 11, 2019 12:23 pm
What are my chances of being audited this year or should I worry? Joint Income $240k+

I plan to combine 5 years of charitable giving due to the new tax laws. Specifically, I plan to put 56k into a Donor Advised Fund and give out 14k this year, for a total of 70k of cash giving this year. The goal is of course to pull from the DAF for the next 4 years to give and taking a big hit now essentially getting a tax write-off for projected charitable giving for the future.

If the chance of being audited goes up, I might plan to purchase audit insurance while doing my own taxes which is the reason for my asking. I might let someone else do the grunt work though it is likely I will just be providing receipts from Fidelity and current year organizations. That is simple to do by myself also but didn't know if I was missing something that a professional might need to handle.

Thoughts? Does this sound as straightforward as I think on tax writeoffs and benefits?
Are your "14k" figures (and multiples) because you think that's the annual limit? If so, it's now $15k pp/yr.
This may or may not affect your planning, obviously.

Audit insurance??
How complex are your returns, and how uncertain are you that they are correct?

RM
14k is not dependent on anything. I picked this randomly basing on average giving from past years and was trying to keep it cleaner.

I normally itemize but don't have complex returns in my opinion. Backdoor Roth, Mega-backdoor Roth mainly and a few espp sales. No home business, land, rentals, etc.

Glockenspiel
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Re: Will I be audited?

Post by Glockenspiel » Mon Nov 11, 2019 12:43 pm

The IRS is incredibly understaffed and don't typically audit people with complex situations. They typically go after the "easy targets" of people claiming the earned income tax credit and other easy-picking's from the lower-middle or poverty class.

HomeStretch
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Re: Will I be audited?

Post by HomeStretch » Mon Nov 11, 2019 12:45 pm

I think your chances of being audited are low. If you are comfortable doing your own taxes, likely you would be comfortable responding to any IRS notices. That said, a poster in another thread recently said s/he was happy with TT’s Audit Defense’s assistance in responding to an IRS notice.

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Ddd7651
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Re: Will I be audited?

Post by Ddd7651 » Mon Nov 11, 2019 12:48 pm

Rus In Urbe wrote:
Mon Nov 11, 2019 12:36 pm
We established a DAF (at Vanguard) and give around that amount each year to offset taxes. The IRS gets reports from a Vanguard, sees the money through transfers, knows that once that money leaves your account and goes into the DAF it can't come out again and it is an immediate charitable contribution in full, etc.

For us, so far, no hint of an audit.

Just be sure you follow the rules, of course: The tax deductibility limits of contributions to donor- advised funds are the same as other 501(c)(3) public charities. A contribution of cash is deductible up to 60% of a donor's adjusted gross income (AGI) and a contribution of an appreciated asset or investment is deductible up to 30% of a donor's AGI. Also, file a tax form about the DAF (info on that is on the Vanguard site).

The IRS (largely for political reasons I can't go into here on this board) is vastly underfunded. INFO: The IRS audited almost 1.0 million tax returns, approximately 0.5 percent of all returns filed in Calendar Year 2017. So your chances of being audited are pretty small.

Unless you have some other factor that draws the IRS's attention, I doubt contributing to a DAF will bring on an audit.

But perhaps other Bogleheads (perhaps who have worked for the the IRS) can enlighten us on the factors that put you at higher audit risk.....

Good luck to you and congratulations on your philanthropic activities! Rus :beer
My thought is since it is a straight cash transfer from an account, I am well under the 60% AGI with our 240k+ income. I was reading about the other rules with investments and assets and those should not apply so I believe I am in the clear. I have more room to give but it is beyond comfort and I am trying to stay responsible and will do the same again after this cycle all things staying equal.

Not in question or considered, but I wonder if people have ever taken out a short term loan or HELOC, given that money to charity for a huge tax benefit far exceeding the loan terms and paid it back quickly or with the large tax return? Sounds insane, but I don't know why that popped in my head as something people might do? Again, not going to touch that.

senex
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Re: Will I be audited?

Post by senex » Mon Nov 11, 2019 1:09 pm

Glockenspiel wrote:
Mon Nov 11, 2019 12:43 pm
The IRS is incredibly understaffed and don't typically audit people with complex situations. They typically go after the "easy targets" of people claiming the earned income tax credit and other easy-picking's from the lower-middle or poverty class.
You shouldn't mislead the OP. Audit rate, not absolute count, is the relevant metric. Audit rates for individual returns are highest for the rich & complex returns: international returns (3.4%), returns over $1M (3.2%), returns with Sched C of $100k-200k (2.4%), returns with Sched C of $200k+ (1.9%). For comparison, EIC audit rates are 1.4%. [1]

As to OP's situation, I have gotten IRS mail requests for additional information and mine were trivial to handle. They would ask something like "please provide receipt for charitable donation XYZ," and I would mail the receipt, and a month later I'd get a letter saying thank you, your return is accepted as filed (or whatever they say).


[1] https://www.irs.gov/pub/irs-soi/18db09aex.xls

stan1
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Re: Will I be audited?

Post by stan1 » Mon Nov 11, 2019 1:13 pm

The audit insurance (such as you might buy through your tax software) is not expensive, but in this case if you do get any communication from the IRS your response will be very easy. Just send in the documentation they ask for. You'd have to keep good records and pull together the paperwork whether or not you had the audit insurance.

GT99
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Re: Will I be audited?

Post by GT99 » Mon Nov 11, 2019 1:28 pm

Glockenspiel wrote:
Mon Nov 11, 2019 12:43 pm
The IRS is incredibly understaffed and don't typically audit people with complex situations. They typically go after the "easy targets" of people claiming the earned income tax credit and other easy-picking's from the lower-middle or poverty class.
Am I missing some sort of sarcasm here? If not, the only explanation is that this is just agenda driven nonsense. As has been pointed out, simply not true.

Goal33
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Re: Will I be audited?

Post by Goal33 » Mon Nov 11, 2019 2:01 pm

Rus In Urbe wrote:
Mon Nov 11, 2019 12:36 pm
The IRS gets reports from a Vanguard, sees the money through transfers
What kind of report is the IRS getting from Vanguard? Is there an actual form?
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Stinky
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Re: Will I be audited?

Post by Stinky » Mon Nov 11, 2019 2:19 pm

8foot7 wrote:
Mon Nov 11, 2019 12:31 pm
Your chance of being audited in person is so low as to be non-existent. Your chance of a receiving a mail audit is higher but not significantly so. If everything you are doing is aboveboard and easily documented via receipts and letters, then audit insurance is a waste.
I agree with this.

I established my DAF a few years ago with a larger contribution than OP plans to make, funded with appreciated common stock. I read and followed all the rules. Nary a peep from IRS.
It's a GREAT day to be alive - Travis Tritt

Rus In Urbe
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Re: Will I be audited?

Post by Rus In Urbe » Mon Nov 11, 2019 3:39 pm

Rus In Urbe wrote: ↑Mon Nov 11, 2019 12:36 pm
The IRS gets reports from a Vanguard, sees the money through transfers

Goal33
What kind of report is the IRS getting from Vanguard? Is there an actual form?
What kind of question is this? Um, Vanguard Charitable is kinda too busy to let me in on how it reports to the IRS. And it's not my business anyway, as long as my DAF is on the up-and-up, as Vanguard Charitable is. Similarly, Bank transfers (deposits, withdrawals, particularly of large funds) are tracked and traced by the IRS. Of course.

Regarding DAFs: there IS a form that the individual taxpayer who is contributing to a DAF has to fill out and file with taxes. And it's really worth stressing (to those who have never used a DAF) that once the money leaves your account and goes into the DAF, it IS NO LONGER YOURS. You get an immediate tax deduction and you can parcel that money out to nonprofits now or in the future, but you no longer "own" that money. It has been contributed. A lot of folks don't really get this.
Last edited by Rus In Urbe on Mon Nov 11, 2019 3:52 pm, edited 1 time in total.
I'd like to live as a poor man with lots of money. ~Pablo Picasso

Rus In Urbe
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Re: Will I be audited?

Post by Rus In Urbe » Mon Nov 11, 2019 3:49 pm

Not in question or considered, but I wonder if people have ever taken out a short term loan or HELOC, given that money to charity for a huge tax benefit far exceeding the loan terms and paid it back quickly or with the large tax return? Sounds insane, but I don't know why that popped in my head as something people might do? Again, not going to touch that.
Let me try to work this out.
Let's say you are in the 35% tax bracket and you owe $25,000 in taxes.
You take out a $100,000 loan short-term loan at, what, 10% or $10,000? (just to use a round figure)

You put that borrowed $100,000 into a DAF (see my comment above---that money is NO LONGER YOURS) and you get an immediate $25,000 back from the IRS and you pay off the $10,000 in loan interest!

WOW! You've just made $15,000! Right?

Oh, no. :oops: :oops: :oops: :oops: :oops: :oops: :oops:
Now you OWE $100,000 principal to whoever was dumb enough to loan this to you.

Yes, this sounds insane.
I'd like to live as a poor man with lots of money. ~Pablo Picasso

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neurosphere
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Re: Will I be audited?

Post by neurosphere » Mon Nov 11, 2019 3:56 pm

senex wrote:
Mon Nov 11, 2019 1:09 pm
Audit rate, not absolute count, is the relevant metric. Audit rates for individual returns are highest for the rich & complex returns...

[1] https://www.irs.gov/pub/irs-soi/18db09aex.xls
THANK YOU for this link. I had no idea such detailed data was available.

Edit: Am I reading line 16 correctly? That of business returns between $100,000 and $200,000, the AVERAGE additional tax from the audit is $24k to $30k (field vs correspondence audit, columns 11 and 12)? I'd rather have median values, but still, doesn't this imply a lot of, um "mistakes" on these returns? Alternately, the IRS is good at sniffing out which returns are more likely to yield fruit and thus the audited returns might have much higher errors than if audits were all randomly chosen. Still, interesting.

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Re: Will I be audited?

Post by bsteiner » Mon Nov 11, 2019 4:16 pm

Ddd7651 wrote:
Mon Nov 11, 2019 12:23 pm
What are my chances of being audited this year or should I worry? Joint Income $240k+

I plan to combine 5 years of charitable giving due to the new tax laws. Specifically, I plan to put 56k into a Donor Advised Fund and give out 14k this year, for a total of 70k of cash giving this year. ...
There's no way to be sure. A $70,000 charitable contribution on a $240,000 income may (or may not) look high enough that they may (or may not) want to audit it to make sure that it's correct. But as others have noted, if you have the records to substantiate it, if they audit it, you'll just give them the documentation.
neurosphere wrote:
Mon Nov 11, 2019 3:56 pm
... the IRS is good at sniffing out which returns are more likely to yield fruit and thus the audited returns might have much higher errors than if audits were all randomly chosen. ...
They are. They've had many years of experience at this, so they have ways of deciding which returns to audit. The formula is guarded about as well as the formula for Coca-Cola so we don't know what it is.

shess
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Re: Will I be audited?

Post by shess » Mon Nov 11, 2019 4:42 pm

Ddd7651 wrote:
Mon Nov 11, 2019 12:23 pm
What are my chances of being audited this year or should I worry? Joint Income $240k+

I plan to combine 5 years of charitable giving due to the new tax laws. Specifically, I plan to put 56k into a Donor Advised Fund and give out 14k this year, for a total of 70k of cash giving this year. The goal is of course to pull from the DAF for the next 4 years to give and taking a big hit now essentially getting a tax write-off for projected charitable giving for the future.

If the chance of being audited goes up, I might plan to purchase audit insurance while doing my own taxes which is the reason for my asking. I might let someone else do the grunt work though it is likely I will just be providing receipts from Fidelity and current year organizations. That is simple to do by myself also but didn't know if I was missing something that a professional might need to handle.

Thoughts? Does this sound as straightforward as I think on tax writeoffs and benefits?
Over the years we donated >$100k of appreciated stock to our DAF (at Vanguard Charitable) multiple times, on income somewhat higher than that, and we've never been audited. One year we made a large DAF contribution specifically to neutralize a large stock sale. I don't think it's likely that you would be audited for straight-forward charitable gifts to a large donor-advised fund provider.

I'd probably not want to get too close to the %50 limit versus, just in case (it sounds like you're fine). If I was worried, I'd probably stick to one of the big providers as opposed to using a small provider associated with any organization I have an affiliation with.

Also, probably too late now, but I'd have probably structured it as $70k to the DAF, then $14k from the DAF to your various charities even this year. I'm 100% sure that giving to my DAF is acceptable, and I'm 100% sure that the DAF will verify that who I write grants to is acceptable (and it's their problem if not), so IMHO that immediately reduces the number of moving parts on my return. But I don't think I'd lose sleep over it if you've already made your charitable gifts.

Also, in addition to chunking current contributions versus yearly payouts, consider retirement. It might be worth pre-funding some of that giving, since your rates will probably be lower (or zero) in retirement.

Gill
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Re: Will I be audited?

Post by Gill » Mon Nov 11, 2019 4:46 pm

Why don't you make it easy on yourself and just put the $70,000 into the DAF. You can make grants from the DAF immediately once it's funded.
Gill
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Ddd7651
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Re: Will I be audited?

Post by Ddd7651 » Mon Nov 11, 2019 5:13 pm

Gill wrote:
Mon Nov 11, 2019 4:46 pm
Why don't you make it easy on yourself and just put the $70,000 into the DAF. You can make grants from the DAF immediately once it's funded.
Gill
I’ve already given some this year before I studied up on DAFs. My original plan was to give it straight to specific charities a few years in advance. I got familiar with the benefits of a DAF and loved the benefits so my plan developed slowly throughout the year. At this point I will already be getting a tax receipt from a couple so hitting transfer one last time won’t give me any extra paperwork necessarily. However, after this year I plan to go the route of only from a DAF as suggested for the simplicity of paperwork and of their vetting process from here on out.

Thanks for all of the advice!

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Abel
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Re: Will I be audited?

Post by Abel » Mon Nov 11, 2019 5:29 pm

We got audited for the first time ever, because we put 5 yrs of charitable contributions into a donor advised fund in 2017. We're not rich (but nobody ever thinks they are, do they?) and the IRS guy said is was solely because of the large charitable contribution. Anticipating the audit was a bit stressful though the audit process went smoothly. The IRS guy had never heard of a donor advised fund (Fidelity). I wasn't 100% sure it was technically a 501(c)(3) but afterward I looked it up, and it is. Overall, IMO a donor advised fund is well worth the tax savings, though DW isn't not 100% in agreement at this point.

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FIREchief
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Re: Will I be audited?

Post by FIREchief » Mon Nov 11, 2019 6:49 pm

Rus In Urbe wrote:
Mon Nov 11, 2019 3:39 pm
Rus In Urbe wrote: ↑Mon Nov 11, 2019 12:36 pm
The IRS gets reports from a Vanguard, sees the money through transfers

Goal33
What kind of report is the IRS getting from Vanguard? Is there an actual form?
What kind of question is this? Um, Vanguard Charitable is kinda too busy to let me in on how it reports to the IRS.
It was an excellent question. I've never heard of charities reporting donations, by individual, to the IRS. Does this mean I need to add my taxpayer ID# to a check that I write to my local church?
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neurosphere
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Re: Will I be audited?

Post by neurosphere » Mon Nov 11, 2019 7:01 pm

FIREchief wrote:
Mon Nov 11, 2019 6:49 pm
Rus In Urbe wrote:
Mon Nov 11, 2019 3:39 pm
Rus In Urbe wrote: ↑Mon Nov 11, 2019 12:36 pm
The IRS gets reports from a Vanguard, sees the money through transfers

Goal33
What kind of report is the IRS getting from Vanguard? Is there an actual form?
What kind of question is this? Um, Vanguard Charitable is kinda too busy to let me in on how it reports to the IRS.
It was an excellent question. I've never heard of charities reporting donations, by individual, to the IRS. Does this mean I need to add my taxpayer ID# to a check that I write to my local church?
I'm the treasurer and/or president of three 501c3 corporations. We've never given info on individual donors to the IRS, unless the donations exceed $5000. But that contact info is through a tax filing for the non-profit (a "990" form), but does not include things like the donors SS #. But we do have to give letters/receipts to the donors under certain circumstances. Not an expert, but seems like the burden of proof is on the donor.
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Ddd7651
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Re: Will I be audited?

Post by Ddd7651 » Mon Nov 11, 2019 7:07 pm

Abel wrote:
Mon Nov 11, 2019 5:29 pm
We got audited for the first time ever, because we put 5 yrs of charitable contributions into a donor advised fund in 2017. We're not rich (but nobody ever thinks they are, do they?) and the IRS guy said is was solely because of the large charitable contribution. Anticipating the audit was a bit stressful though the audit process went smoothly. The IRS guy had never heard of a donor advised fund (Fidelity). I wasn't 100% sure it was technically a 501(c)(3) but afterward I looked it up, and it is. Overall, IMO a donor advised fund is well worth the tax savings, though DW isn't not 100% in agreement at this point.
Thank you for your experience. And you just sent them your DAF paperwork and they left you alone after that it seems? Is that all they wanted or did they dig anymore? Seems less stressful maybe than I think. Would you have felt better buying some audit protection and sending paperwork through them or is it basically the same as you sending it with a tad more anxiety?

illumination
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Re: Will I be audited?

Post by illumination » Mon Nov 11, 2019 7:12 pm

What does audit insurance cost? Just curious.

stan1
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Re: Will I be audited?

Post by stan1 » Mon Nov 11, 2019 7:25 pm

illumination wrote:
Mon Nov 11, 2019 7:12 pm
What does audit insurance cost? Just curious.
AuditDefense through TurboTax is $40/year. Their website says they have 11,000,000 members. Do the math! It's low cost insurance that it seems a lot of people are willing to pay into even though very few will need it. People are afraid of audits for no reason. If only Long Term Care insurance worked that way!

https://intuit.taxaudit.com/prepaid-audit-defense-1

Trader Joe
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Re: Will I be audited?

Post by Trader Joe » Mon Nov 11, 2019 7:29 pm

Ddd7651 wrote:
Mon Nov 11, 2019 12:23 pm
What are my chances of being audited this year or should I worry? Joint Income $240k+

I plan to combine 5 years of charitable giving due to the new tax laws. Specifically, I plan to put 56k into a Donor Advised Fund and give out 14k this year, for a total of 70k of cash giving this year. The goal is of course to pull from the DAF for the next 4 years to give and taking a big hit now essentially getting a tax write-off for projected charitable giving for the future.

If the chance of being audited goes up, I might plan to purchase audit insurance while doing my own taxes which is the reason for my asking. I might let someone else do the grunt work though it is likely I will just be providing receipts from Fidelity and current year organizations. That is simple to do by myself also but didn't know if I was missing something that a professional might need to handle.

Thoughts? Does this sound as straightforward as I think on tax writeoffs and benefits?
You should always do the right thing. Always!

You should also also always consider your chances of being audit as high. Always!

michaeljc70
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Re: Will I be audited?

Post by michaeljc70 » Mon Nov 11, 2019 7:43 pm

Your chances of being audited are probably low and if it is all legit I don't see why you would think twice about it. I mean, this is all easily documentable. If you get a letter, you send in the documentation. You don't need a team of accountants or lawyers for that.

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fortfun
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Re: Will I be audited?

Post by fortfun » Mon Nov 11, 2019 7:51 pm

I don't think there is anyone left working at the IRS to audit you. I think it has been gutted...

shess
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Re: Will I be audited?

Post by shess » Mon Nov 11, 2019 7:59 pm

michaeljc70 wrote:
Mon Nov 11, 2019 7:43 pm
Your chances of being audited are probably low and if it is all legit I don't see why you would think twice about it. I mean, this is all easily documentable. If you get a letter, you send in the documentation. You don't need a team of accountants or lawyers for that.
I've been filing taxes for over 30 years. In that time I have had really significant changes of status, for many years I only had 1099 income, when I had W-2 income I had substantial and varied income from option grants non-qualified and ISO, ESPP plans, dividend income, etc. The only times I've had IRS issues is a couple times when they sent me a note saying "This is wrong, fix it", and I sent a note back saying "Sorry, here's clarifying documentation", and they responded with "OK, you're right".

Keep in mind that in case of audit, audit insurance doesn't just magically make things go away. You'll still have to dig around to satisfy whatever they requested, whoever you buy insurance from can't do that for you. If it's just "Provide supporting documentation", usually you either can provide that supporting documentation, or you can't, and there's not a lot some third party can do to change the situation even if someone is paying them. That's why it's so cheap, because there aren't many situations where they are on the hook for anything.

Sconie
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Re: Will I be audited?

Post by Sconie » Mon Nov 11, 2019 8:12 pm

fortfun wrote:
Mon Nov 11, 2019 7:51 pm
I don't think there is anyone left working at the IRS to audit you. I think it has been gutted...
Uh, no.....

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Goal33
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Re: Will I be audited?

Post by Goal33 » Mon Nov 11, 2019 8:17 pm

Rus In Urbe wrote:
Mon Nov 11, 2019 3:39 pm
Rus In Urbe wrote: ↑Mon Nov 11, 2019 12:36 pm
The IRS gets reports from a Vanguard, sees the money through transfers

Goal33
What kind of report is the IRS getting from Vanguard? Is there an actual form?
What kind of question is this? Um, Vanguard Charitable is kinda too busy to let me in on how it reports to the IRS. And it's not my business anyway, as long as my DAF is on the up-and-up, as Vanguard Charitable is. Similarly, Bank transfers (deposits, withdrawals, particularly of large funds) are tracked and traced by the IRS. Of course.

Regarding DAFs: there IS a form that the individual taxpayer who is contributing to a DAF has to fill out and file with taxes. And it's really worth stressing (to those who have never used a DAF) that once the money leaves your account and goes into the DAF, it IS NO LONGER YOURS. You get an immediate tax deduction and you can parcel that money out to nonprofits now or in the future, but you no longer "own" that money. It has been contributed. A lot of folks don't really get this.
Well I thought it was a good question which is why I asked. Seems like you’re just making stuff up.

I was asking to clarify if Vanguard actually sends this info to the IRS and it sounds like they don’t.
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michaeljc70
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Re: Will I be audited?

Post by michaeljc70 » Mon Nov 11, 2019 8:25 pm

shess wrote:
Mon Nov 11, 2019 7:59 pm
michaeljc70 wrote:
Mon Nov 11, 2019 7:43 pm
Your chances of being audited are probably low and if it is all legit I don't see why you would think twice about it. I mean, this is all easily documentable. If you get a letter, you send in the documentation. You don't need a team of accountants or lawyers for that.
I've been filing taxes for over 30 years. In that time I have had really significant changes of status, for many years I only had 1099 income, when I had W-2 income I had substantial and varied income from option grants non-qualified and ISO, ESPP plans, dividend income, etc. The only times I've had IRS issues is a couple times when they sent me a note saying "This is wrong, fix it", and I sent a note back saying "Sorry, here's clarifying documentation", and they responded with "OK, you're right".

Keep in mind that in case of audit, audit insurance doesn't just magically make things go away. You'll still have to dig around to satisfy whatever they requested, whoever you buy insurance from can't do that for you. If it's just "Provide supporting documentation", usually you either can provide that supporting documentation, or you can't, and there's not a lot some third party can do to change the situation even if someone is paying them. That's why it's so cheap, because there aren't many situations where they are on the hook for anything.
I've been filing taxes for around 30 years, most of which I was self employed. I also did taxes as a professional early in my career. I have received a few letters over the year from the Feds and state and all were easily resolved by providing documentation. Now, if it is more vague, that is different. By that I mean was 80% of your vehicle usage business? Was your office deduction legit?

SrGrumpy
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Re: Will I be audited?

Post by SrGrumpy » Mon Nov 11, 2019 8:54 pm

Sconie wrote:
Mon Nov 11, 2019 8:12 pm
fortfun wrote:
Mon Nov 11, 2019 7:51 pm
I don't think there is anyone left working at the IRS to audit you. I think it has been gutted...
Uh, no.....
Number of employees: 74,454 (Full-time equivalent, 2019)
Yeah, but how many of those staffers do anything? Or anything involved with auditing?

JBTX
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Re: Will I be audited?

Post by JBTX » Mon Nov 11, 2019 10:02 pm

So basically do you want to insure against the very low probability of needing a CPA to assist with an audit, which would cost what, maybe $500?

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BolderBoy
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Re: Will I be audited?

Post by BolderBoy » Tue Nov 12, 2019 11:02 am

FIREchief wrote:
Mon Nov 11, 2019 6:49 pm
Does this mean I need to add my taxpayer ID# to a check that I write to my local church?
If the church doesn't file a form 990 then the IRS likely has no idea how much the church takes in the form of donations. Churches are usually exempt from filing 990s.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

NotWhoYouThink
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Re: Will I be audited?

Post by NotWhoYouThink » Tue Nov 12, 2019 11:28 am

I don't care if I get audited. I know what I did and why and have the receipts to document everything. Why should you care if you are in the same situation?

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neurosphere
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Re: Will I be audited?

Post by neurosphere » Tue Nov 12, 2019 11:41 am

BolderBoy wrote:
Tue Nov 12, 2019 11:02 am
FIREchief wrote:
Mon Nov 11, 2019 6:49 pm
Does this mean I need to add my taxpayer ID# to a check that I write to my local church?
If the church doesn't file a form 990 then the IRS likely has no idea how much the church takes in the form of donations. Churches are usually exempt from filing 990s.
990 forms do not ask for SS. Only names and addresses, and I believe (don't quote me) only for donors/donations above $5000. So if you've received a tax donation confirmation, they already have all the info they need if they are required to report anything.

GuyInFL
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Re: Will I be audited?

Post by GuyInFL » Tue Nov 12, 2019 11:44 am

Abel wrote:
Mon Nov 11, 2019 5:29 pm
We got audited for the first time ever, because we put 5 yrs of charitable contributions into a donor advised fund in 2017. We're not rich (but nobody ever thinks they are, do they?) and the IRS guy said is was solely because of the large charitable contribution. Anticipating the audit was a bit stressful though the audit process went smoothly. The IRS guy had never heard of a donor advised fund (Fidelity). I wasn't 100% sure it was technically a 501(c)(3) but afterward I looked it up, and it is. Overall, IMO a donor advised fund is well worth the tax savings, though DW isn't not 100% in agreement at this point.
I did the same in 2017 and wasn’t audited. That seems pretty low risk even if audited since it is objective rather than subjective.

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FIREchief
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Re: Will I be audited?

Post by FIREchief » Tue Nov 12, 2019 1:09 pm

GuyInFL wrote:
Tue Nov 12, 2019 11:44 am
Abel wrote:
Mon Nov 11, 2019 5:29 pm
We got audited for the first time ever, because we put 5 yrs of charitable contributions into a donor advised fund in 2017. We're not rich (but nobody ever thinks they are, do they?) and the IRS guy said is was solely because of the large charitable contribution. Anticipating the audit was a bit stressful though the audit process went smoothly. The IRS guy had never heard of a donor advised fund (Fidelity). I wasn't 100% sure it was technically a 501(c)(3) but afterward I looked it up, and it is. Overall, IMO a donor advised fund is well worth the tax savings, though DW isn't not 100% in agreement at this point.
I did the same in 2017 and wasn’t audited. That seems pretty low risk even if audited since it is objective rather than subjective.
2017 was unique due to the tax law changes occurring for the 2018 tax year. That IRS guy must have been a newbie if he had never heard of a DAF and he was auditing a return "solely because of the large charitable contribution."
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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fortfun
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Re: Will I be audited?

Post by fortfun » Tue Nov 12, 2019 2:02 pm

Sconie wrote:
Mon Nov 11, 2019 8:12 pm
fortfun wrote:
Mon Nov 11, 2019 7:51 pm
I don't think there is anyone left working at the IRS to audit you. I think it has been gutted...
Uh, no.....

Internal Revenue Service
Federal agency
DescriptionThe Internal Revenue Service is the revenue service of the United States federal government. The government agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue, who is appointed to a five-year term by the President of the United States. Wikipedia
Customer service chat: Online Chat
Headquarters: Washington, D.C.
Founded: July 1, 1862, United States
Employees: 74,454 (FTE) (2019)
Number of employees: 74,454 (Full-time equivalent, 2019)
Parent organization: United States Department of the Treasury
Commissioner: David J. Kautter is the Acting Commissioner of the IRS. irs.gov
I was exaggerating but you'll find many article like these:
https://www.propublica.org/article/how- ... was-gutted

https://www.cnbc.com/2018/05/11/budget- ... nners.html

"The number of new investigations into delinquent taxpayers fell by 85 percent from 2012 to 2017. The total number of enforcement actions like levies, liens and seizures has similarly plummeted."

Jack FFR1846
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Re: Will I be audited?

Post by Jack FFR1846 » Tue Nov 12, 2019 2:07 pm

Sconie wrote:
Mon Nov 11, 2019 8:12 pm
fortfun wrote:
Mon Nov 11, 2019 7:51 pm
I don't think there is anyone left working at the IRS to audit you. I think it has been gutted...
Uh, no.....

Internal Revenue Service
Federal agency
DescriptionThe Internal Revenue Service is the revenue service of the United States federal government. The government agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue, who is appointed to a five-year term by the President of the United States. Wikipedia
Customer service chat: Online Chat
Headquarters: Washington, D.C.
Founded: July 1, 1862, United States
Employees: 74,454 (FTE) (2019)
Number of employees: 74,454 (Full-time equivalent, 2019)
Parent organization: United States Department of the Treasury
Commissioner: David J. Kautter is the Acting Commissioner of the IRS. irs.gov
From 2013 to 2018, the number of FTE (full time equivalent positions) has dropped from 87k to 77k. So gutted sounds about right.

https://www.irs.gov/statistics/irs-budget-and-workforce
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Abel
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Re: Will I be audited?

Post by Abel » Wed Nov 13, 2019 7:28 am

Ddd7651 wrote:
Mon Nov 11, 2019 7:07 pm
Abel wrote:
Mon Nov 11, 2019 5:29 pm
We got audited for the first time ever, because we put 5 yrs of charitable contributions into a donor advised fund in 2017. We're not rich (but nobody ever thinks they are, do they?) and the IRS guy said is was solely because of the large charitable contribution. Anticipating the audit was a bit stressful though the audit process went smoothly. The IRS guy had never heard of a donor advised fund (Fidelity). I wasn't 100% sure it was technically a 501(c)(3) but afterward I looked it up, and it is. Overall, IMO a donor advised fund is well worth the tax savings, though DW isn't not 100% in agreement at this point.
Thank you for your experience. And you just sent them your DAF paperwork and they left you alone after that it seems? Is that all they wanted or did they dig anymore? Seems less stressful maybe than I think. Would you have felt better buying some audit protection and sending paperwork through them or is it basically the same as you sending it with a tad more anxiety?
We had to go in to the local office with paper copies of receipts for that year plus the year before and the year after, as they requested. Printing it all out took about $30 at Staples! And then all he wanted was the list of donations for 2017 along with the receipts that said it was a 501c3 charity and that we received no tangible goods. Not every receipt had those words, hence my slight anxiety. Audit protection wouldn't have improved anything in our case, but I'd have wanted it if the higher dollar donations were missing receipts.

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Ddd7651
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Re: Will I be audited?

Post by Ddd7651 » Wed Nov 13, 2019 8:33 am

NotWhoYouThink wrote:
Tue Nov 12, 2019 11:28 am
I don't care if I get audited. I know what I did and why and have the receipts to document everything. Why should you care if you are in the same situation?
Since you don't care if you get audited then why should another person with lack of knowledge on audit processes/procedures care too?

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Ddd7651
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Re: Will I be audited?

Post by Ddd7651 » Wed Nov 13, 2019 8:52 am

Abel wrote:
Wed Nov 13, 2019 7:28 am
Ddd7651 wrote:
Mon Nov 11, 2019 7:07 pm
Abel wrote:
Mon Nov 11, 2019 5:29 pm
We got audited for the first time ever, because we put 5 yrs of charitable contributions into a donor advised fund in 2017. We're not rich (but nobody ever thinks they are, do they?) and the IRS guy said is was solely because of the large charitable contribution. Anticipating the audit was a bit stressful though the audit process went smoothly. The IRS guy had never heard of a donor advised fund (Fidelity). I wasn't 100% sure it was technically a 501(c)(3) but afterward I looked it up, and it is. Overall, IMO a donor advised fund is well worth the tax savings, though DW isn't not 100% in agreement at this point.
Thank you for your experience. And you just sent them your DAF paperwork and they left you alone after that it seems? Is that all they wanted or did they dig anymore? Seems less stressful maybe than I think. Would you have felt better buying some audit protection and sending paperwork through them or is it basically the same as you sending it with a tad more anxiety?
We had to go in to the local office with paper copies of receipts for that year plus the year before and the year after, as they requested. Printing it all out took about $30 at Staples! And then all he wanted was the list of donations for 2017 along with the receipts that said it was a 501c3 charity and that we received no tangible goods. Not every receipt had those words, hence my slight anxiety. Audit protection wouldn't have improved anything in our case, but I'd have wanted it if the higher dollar donations were missing receipts.
Very helpful experience. Thank you!

Rus In Urbe
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Re: Will I be audited?

Post by Rus In Urbe » Wed Nov 13, 2019 9:03 am

neurosphere » Mon Nov 11, 2019 7:01 pm

FIREchief wrote: ↑Mon Nov 11, 2019 6:49 pm
Rus In Urbe wrote: ↑Mon Nov 11, 2019 3:39 pm
Rus In Urbe wrote: ↑Mon Nov 11, 2019 12:36 pm
The IRS gets reports from a Vanguard, sees the money through transfers

Goal33
What kind of report is the IRS getting from Vanguard? Is there an actual form?
What kind of question is this? Um, Vanguard Charitable is kinda too busy to let me in on how it reports to the IRS.
It was an excellent question. I've never heard of charities reporting donations, by individual, to the IRS. Does this mean I need to add my taxpayer ID# to a check that I write to my local church?
I'm the treasurer and/or president of three 501c3 corporations. We've never given info on individual donors to the IRS, unless the donations exceed $5000. But that contact info is through a tax filing for the non-profit (a "990" form), but does not include things like the donors SS #. But we do have to give letters/receipts to the donors under certain circumstances. Not an expert, but seems like the burden of proof is on the donor.
Of course the burden of reporting your charitable contributions to the IRS is on the donor.
I never said they were not.

It's a good idea to understand how DAFs work.
Different from a regular charity.
My answers have been misconstrued, but never mind.

BTW, initial contribution to a Vanguard Charitable DAF is $25,000.
All additional contributions to Vanguard Charitable DAF must exceed $5,000.
Sure, all is reported to the IRS. As it should be.

Rus
I'd like to live as a poor man with lots of money. ~Pablo Picasso

NotWhoYouThink
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Re: Will I be audited?

Post by NotWhoYouThink » Wed Nov 13, 2019 9:07 am

Ddd7651 wrote:
Wed Nov 13, 2019 8:33 am
NotWhoYouThink wrote:
Tue Nov 12, 2019 11:28 am
I don't care if I get audited. I know what I did and why and have the receipts to document everything. Why should you care if you are in the same situation?
Since you don't care if you get audited then why should another person with lack of knowledge on audit processes/procedures care too?
The question was why do people who understand what they claimed on their taxes fear an audit?

If someone else does your taxes and you don't understand the entries on the forms, then you would want help with an audit. But if you do it yourself and know what the justification was for all the entries, then what's the scary part about explaining those entries to an auditor?

I know that some people just are not comfortable dealing with government authorities, but if that's not you an audit shouldn't present anything other than an annoyance.

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dodecahedron
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Re: Will I be audited?

Post by dodecahedron » Wed Nov 13, 2019 9:26 am

Ddd7651 wrote:
Wed Nov 13, 2019 8:52 am
Abel wrote:
Wed Nov 13, 2019 7:28 am
Ddd7651 wrote:
Mon Nov 11, 2019 7:07 pm
Abel wrote:
Mon Nov 11, 2019 5:29 pm
We got audited for the first time ever, because we put 5 yrs of charitable contributions into a donor advised fund in 2017. We're not rich (but nobody ever thinks they are, do they?) and the IRS guy said is was solely because of the large charitable contribution. Anticipating the audit was a bit stressful though the audit process went smoothly. The IRS guy had never heard of a donor advised fund (Fidelity). I wasn't 100% sure it was technically a 501(c)(3) but afterward I looked it up, and it is. Overall, IMO a donor advised fund is well worth the tax savings, though DW isn't not 100% in agreement at this point.
Thank you for your experience. And you just sent them your DAF paperwork and they left you alone after that it seems? Is that all they wanted or did they dig anymore? Seems less stressful maybe than I think. Would you have felt better buying some audit protection and sending paperwork through them or is it basically the same as you sending it with a tad more anxiety?
We had to go in to the local office with paper copies of receipts for that year plus the year before and the year after, as they requested. Printing it all out took about $30 at Staples! And then all he wanted was the list of donations for 2017 along with the receipts that said it was a 501c3 charity and that we received no tangible goods. Not every receipt had those words, hence my slight anxiety. Audit protection wouldn't have improved anything in our case, but I'd have wanted it if the higher dollar donations were missing receipts.
Very helpful experience. Thank you!
One of the BEST things about DAFs is that they are extremely meticulous about providing exactly the correct wording in their letters of acknowledgment. Some smaller charities have volunteers writing the letters and they may not be completely clear about the exact documentation the IRS requires. By contrast, the folks doing the letters at a DAF are consummate professionals and their letters have every i dotted and every t crossed (in consultation with their legal counsel.)

Another great thing about using a DAF is that if I run all of my donations through the DAF, I only have to dig up ONE letter to send the IRS if audited, not a letter from every charity that I ultimately directed donations to via the DAF. And if I lose my copy of the letter, it is readily retrievable by logging into my DAF account. No $30 copying and printing and postage bills for me!

(In actual fact, I do not run *all* giving through my DAF. There are some situations where it is easier just to write a check or use a credit card to get a donation there quickly. But donations under $250 do not have the strict documentation rules that larger donations do. A cancelled check or credit card receipt can suffice for donations under $250. By contrast, for donations over $250, the IRS needs a formal letter from the recipient charity explicitly stating that nothing was given in exchange for the donation.)

But if and when I get audited, it will not involve $30 worth of copying and printing and postage bills.

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samsoes
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Re: Will I be audited?

Post by samsoes » Wed Nov 13, 2019 3:22 pm

fortfun wrote:
Mon Nov 11, 2019 7:51 pm
I don't think there is anyone left working at the IRS to audit you. I think it has been gutted...
Sadly, I can't find any tissues to dry my eyes...
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Sconie
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Re: Will I be audited?

Post by Sconie » Wed Nov 13, 2019 6:04 pm

samsoes wrote:
Wed Nov 13, 2019 3:22 pm
fortfun wrote:
Mon Nov 11, 2019 7:51 pm
I don't think there is anyone left working at the IRS to audit you. I think it has been gutted...
Sadly, I can't find any tissues to dry my eyes...
Bravo!

That said, I'm absolutely amazed that anyone thinks that an approximate 12% manpower reduction, from 87K to 77K is "gutted." A third or 40% or 50%, yeah---gutted.....but 12%?
I know you think you understand what you thought I said but I'm not sure you realize that what you heard is not what I meant. - Alan Greenspan

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