When the IRS or state tax agency sends you a notice that they want to review your return, it’s likely to feel the pressure. Luckily, most audits are routine and most taxpayers come out of them without any major changes. The key is to defend your deductions with confidence and logic. This guide walks you through the steps you need to take—from preparation to post‑audit follow‑up—so you can protect the legitimate expenses you claimed.

Why Deductions Matter During an Audit

Your deductions can be the difference between a high tax bill and a lower one. The tax authorities focus on deductions as they reduce taxable income and are the most common source of errors or disputes. Misstated or unsupported deductions may trigger an audit, and when the audit starts, the burden of proof moves to you. If you can show that each deduction was legitimate, accurate, and backed by documentation, the audit will usually end in your favor.

Frequent Deduction Pitfalls

No receipt – Claiming a $200 equipment purchase without a receipt. Wrong Category – Recording a client entertainment expense as a business meal when the IRS deems it non‑deductible. Personal Expenses Mixed In – Mixing a family vacation cost into your travel deduction. Misdated Items – Claiming a 2023 expense on a 2022 tax return. Inflated Numbers – Inflating mileage or home‑office square footage.

The audit process is not a surprise; it is a systematic review. Grasping how the IRS scrutinizes deductions will help you organize your defense.

Preparing in Advance of the Audit

Compile a Master File – Keep a folder (physical or digital) for each expense you plan to claim, including receipts, invoices, credit‑card statements, mileage logs, and any support documents. Verify Accuracy – Verify each deduction against your tax return, ensuring amounts, dates, and categories match exactly. Organize Chronologically – Order documents by tax year, simplifying the expense flow for you and the auditor. Identify Potential Red Flags – If you know an item is close to the limits (e.g., home‑office deduction or charitable contribution caps), flag it as "high‑risk" so you can be extra sure of its documentation. Review IRS Guidance – Consult the relevant IRS Publication for each deduction (e.g., Publication 463 for travel, Publication 463 for mileage, Publication 526 for charitable contributions). Understanding the precise legal wording strengthens your position.

While Under Audit

Stay Calm and Polite – The auditor’s job is to verify facts, not to judge you. A calm demeanor facilitates a smoother discussion. Request a Copy of the Notice – Make sure you understand exactly what the auditor is questioning. Present Documents Methodically – Bring your master file and show the auditor each document that supports the contested deduction. Explain the Reasoning – Briefly justify why the expense is legitimate. For instance, "This $500 coffee ran was a client meeting where we discussed contract terms, so it is a deductible business meal.". Use the IRS Publication as a Reference – If the auditor inquires about a specific deduction, reference the relevant IRS guidance and show how your expense meets the criteria. Keep a Record of the Interaction – Document the auditor’s questions, your replies, and any documents supplied. This can be handy if you need to revisit the audit later. Ask About Next Steps – Clarify the timeline for a decision, whether you need to submit additional paperwork, or whether a waiver or settlement is possible.

Defending Individual Deductions

Business Mileage

- Keep a detailed log noting date, purpose, starting point, destination, and miles traveled.

- Use a mileage tracking app to eliminate guesswork.

- If the auditor requests mileage verification, provide the log plus a statement that the mileage was calculated using the IRS standard mileage rate.

Home‑Office

- Present a floor plan or photo that shows the dedicated space.

- Show evidence that the space is used exclusively for business (e.g., a schedule of business activities held there).

- Calculate the deduction via the simplified or regular method; show the calculations.

Charitable Contributions

- Keep the original receipt or a bank statement showing the transfer.

- For non‑cash donations, require a written appraisal when the value exceeds $5,000.

- Maintain a calendar of the donation event to verify the date falls within the tax year.

Meals & Entertainment

- Attach the receipt, date, attendees, and a short note clarifying the business purpose.

- Note that meals are currently deductible at 50% of the cost; entertainment is typically not deductible.

- If claiming a 50% deduction, ensure you have documentation that the meal was directly related to business.

Capital Expenditures

- Keep the purchase invoice, the purchase date, and the expected useful life.

- Illustrate how the cost is divided between the depreciation schedule and any immediate expensing (e.g., Section 179).

After the Audit

Review the Auditor’s Findings – The auditor will deliver a written report. Read it carefully to check for errors.

Respond Promptly – Should you disagree with a finding, submit a written objection or appeal following IRS guidelines.

Keep Updated Records – Even if the audit is resolved, maintain the documentation for the full period required by IRS rules (usually three years, or longer for certain types of deductions).

Learn and Adjust – Spot any recurring mistakes and modify your bookkeeping practices accordingly.

Practical Tips for Future Audits

- Quarterly Reviews – Do a quick audit of your expenses each quarter to catch discrepancies early.

- Professional Software – Utilize accounting software that automatically flags potential deduction issues.

- Tax Advisor 節税 商品 Check‑In – Bring an accountant to review your return before filing.

- Keep a "Defensive" File – Maintain a dedicated folder for high‑risk deductions so you can pull them up quickly if questioned.

Defending Your Deductions Is a Skill

Audits can feel intimidating, but they are fundamentally a fact‑checking process. By staying organized, keeping meticulous records, and understanding the exact wording of the tax law, you can defend your deductions effectively. Preparation is your strongest defense: the more evidence you have, the less room for error or misinterpretation. Treat each deduction like a small case study—prove its validity, and the audit will end in your favor.