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Show be dealt with in a jour records are too bulky or complicated tooffice or home. district office, a tax agent will come to your While every audit varies, there are a number of basic, useful rules to keep in mind for that visit with the Revenue Service. farmDon't Bt Nenroat. Every year, we hear stories of ers who come to an audit carrying a rifle for "moral support" or frightened little ladies who bolster their courage by sipping at a flask of "cough medicine." An examination makes some people nervous, even when they have nothing to fear. In most cases, your tax man has called you in only to question you about something relatively simple, perhaps a math error or a large blanket claim for contributions which you haven't properly broken down or an unidentified interest deduction or a questionable casualty loss item. Americans, incidentally, are notoriously weak on math. Last year, we corrected close to 2.5 million returns with math mistakes. At least a third of these cases, by the way, involved overpayments errors the taxpayers had made against themselves. Hcitsty Is tkt But Pfiey. Your tax man is interested only in your Form 1040, whether you have reported all your income, and whatever substantiation you may have for deductions nothing else! But there are always taxpayers who believe the tax man will be more sympathetic about dubious claims if they come to the IRS "office dressed practically in rags. Then there are others who, in the course of an audit, suddenly realize they are wearing expensive jewelry and surreptitiously try to slip it off. This sort of strategy won't fool a tax man and, if anything, back-count- ry may make him suspicious and cause him to delve more deeply. Keep Careful Records. You may not be able to produce proof of every business expense, charitable deduction, or medical cost, but if you keep fairly complete records, your tax man is more likely to accept your word on unproved items. Sometimes, this can be carried too far, as with the lady who brought in several shopping bags of empty medicine bottles to substantiate her medical expenses ! Some people keep a small memo book in which they note daily costs and expenses that might be pertinent at tax time. This sort of exactness impresses your tax man. Preparation Saves Time and Money. Carefully arrange your bills and go over your form I assume you keep a copy before the audit An agent's time is limited, and he is appreciative of taxpayers who come fully prepared to explain their deductions. Stand Up for Yonr Rights. If you think your tax man is being unfair in disallowing a deduction, say so. Tax men are not infallible ; and after a long, hard day explaining tax law to troubled taxpayers, they can sometimes make mistakes or overlook a good argument in your favor. The audit procedure is geared for such situations. If you disagree with the agent's conclusions, you can ask for an "informal conference" in which you explain your case to the agent's supervisor or an official who has no connection with the agent. You should realize that there can be honest differences of opinion, and you should take full advantage of your appeal rights if you think your position is correct. Incidentally, the worst argument in the world to throw at a tax man is : "But I took the deduction last year, and you didn't question it." This doesn't justify a deduction and it may spur the tax man to look into previous returns. Tax Specialists Can Help. An accountant or lawyer needn't accompany this could be a worthyou to an audit, but there are cases where while investment. Tax law is a complex business, and a tax specialist to can defend your return more persuasively tipm you and is able ferret out valid deductions in this tangled wilderness of tax law. Needless to say, you (ana not your iax specialist; arc icapuiioiu for your tax return and must pay up if deductions are disallowed. The taxpayer who tries to browbeat the tax man is only asking for trouble. Your Revenue man didn't invent taxes and doesn't enjoy paying them any more than you. He probably has gone through several audits himself. The Government is especially careful about its agents. Comso you might plaining to him about your tax burden won't help, as well smile and cooperate. Let him ask his questions and set the of your knowledge. pace of the examination. Answer to the best Your Government is not so naive as to expect you will volunteer return. We do hope, every weak or disputable point in your tax however, that when one of these disputable areas comes up, you will discuss the matter calmly wjth us. Once the audit is over, the agent may do one of three things ask for more taxes, accept the tax form as you sent it in, or inform not agree with the you of the amount of your refund. If you do and agent's decision, you may ask for an "informal conference," if frill not satisfied, ask for a hearing with the Appellate Division which is the second level of administrative appeal. Cases can be carried right up to the Supreme Court. Of course, most are settled long before this. The final point which should be made about our audit system is that "tax cheating" is relatively limited in America. Out of approximately 98 million tax returns filed last year, criminal prosecution was recommended in only slightly more than 2,000 cases. This is an amazing testimonial to the character and honesty of the American people. I recently took a trip through Europe, and iL-owifVi mo ahiiif nnr recent debate i - t ir,iinA muvnia r "TTnw can there be so manv Americans who object to a cut in taxes?" they chided. I found it difficult to make them understand that Americans, comconsciously or unconsciously, accept the idea that taxes are a like pact between themselves and the Government. We may not burden paying taxes, but we recognize that they are part of the of a democratic society. In our willingness to assess ourselves, we have proved the first principle of democracy : that people are responsible enough to govern themselves. BillyiBc the Tax Man Wont Help. TT A W y E. How Do Yoor Dednctiens Corapare with These of Other Taxpayers? As a special service to its readers, FAMILY WEEKLY has compiled from Government figures this table which shows the average deductions by taxpayers in various income groups, plus the average tax payment for each group. i Gross Income $ 3,500-- $ 4,000 4,000- - 5,000 5,000- - 6,000 6,000- - 7,000 7,000- - 8,000 8,000- - 9,000 9,000- - 10,000 10,000- - 15,000 Contributions $172 190 202 236 258 288 312 413 Taxes Interest $218 255 338 390 442 477 554 588 $201 225 289 337 387 436 - Medical Average Tax $278 297 297 300 $275 350 457 602 773 950 311 356 481 391 605 485 U8 1615 Caplin checks ADP machine (I); like us, he struggles with his own return. chief who has faced an audit himself By MORTIMER CAPLIN Commissioner of Internal Revenue as told to Bob Gaines Family Weekly, March 29, 1964 15 |