Last year alone, the IRS audited nearly 1.5 million people. If you take a lot of tax deductions, you might get audited by the IRS too. And when they audit you, you’d better be able to come up with original receipts or supporting documentation showing the deductions you took were justified. If you don’t have adequate or original enough documentation, they’ll add up the amounts you “stole” from them and demand it.
And they might tack on some fees and penalties, and if they think you willfully evaded paying taxes by reporting fake charitable donations, you’ll go to jail.
You’d better be able to account for every single penny you receive and donate, or else you’re a tax cheat who deserves life imprisonment for stealing from the government.
It’s only slightly ironic to find out that at the IRS’s 3-day, $4.1 million conference in Anaheim, California, they couldn’t account for all their expenses. They know they spent $4.1 million, but they don’t know where it all went. Or at least they think they spent that much. Or that little.
The Treasury Inspector General for Tax Administration (TIGTA) released a report following their own audit of the agency’s lavish conferences that totaled $50 million from 2010 to 2012. Concerning the $4.1 million conference, the report stated:
“While IRS management provided documentation showing the total final costs at $4.1 million, we could not obtain reasonable assurance that this amount represents a full and accurate accounting of the conference costs. The IRS was unable to provide documentation to support all costs associated with the conference. In addition, we requested supporting documentation related to the $50,187 expended for ‘videos.’ However, IRS management stated that this was an estimated cost and could not provide detail on how this cost was estimated. In addition, IRS management could not provide any supporting documentation detailing how this money was spent… Procedures at the time of the conference did not require IRS management to track and report actual conference costs. As a result, TIGTA could not validate the conference cost reported by the IRS.”
So next time you get audited, just tell them that the deductions you took were estimated, that you don’t have any information about how you estimated them, and that you don’t have any documentation either. If you have a business, tell them you’re pretty sure all your business income was spent on your business, but that you don’t have any supporting documentation detailing how the money was actually spent. Tell them you’re sorry, and that you weren’t ever really that good at math.