If the IRS or a state tax agency sends you a notice to examine your return, it’s common to feel the pressure. The good news is that most audits are routine and most taxpayers come out of them without any major changes. The key is to defend your deductions both confidently and logically. This guide takes you through the steps you need—from preparation to post‑audit follow‑up—to protect the legitimate expenses you claimed.

Why Deductions Matter in an Audit

Your deductions are the difference between a high tax bill and a lower one. Tax authorities focus on deductions because they cut taxable income and are the main source of errors or disputes. Misstated or unsupported deductions can trigger an audit, and once an audit starts, the burden of proof shifts to you. If you can demonstrate that each deduction was legitimate, accurate, and supported by documentation, the audit will usually end in your favor.

Typical Deduction Pitfalls

Missing Receipts – Claiming a $200 equipment purchase without a copy of the receipt. Category Error – Logging a client entertainment expense as a business meal when the IRS regards it as non‑deductible. Personal Expenses Mixed In – Including a family vacation cost in your travel deduction. Misdated Items – Claiming a 2023 expense on a 2022 return. Inflated Numbers – Overstating mileage or home‑office area.

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

Getting Ready Before 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 – Sort documents by tax year order, helping both you and the auditor track expense flow. 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 – For each deduction, read the corresponding IRS Publication (e.g., Publication 463 for travel, Publication 463 for mileage, Publication 526 for charitable contributions). Knowing the exact language of the law gives you a strong footing.

While Under Audit

Stay Calm and Polite – The auditor’s purpose is to verify facts, not judge you. A calm demeanor smooths the 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 methodically present each document supporting the contested deduction. Explain the Reasoning – Briefly explain why the expense is legitimate. Example: "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 – Write down the auditor’s questions, your answers, and any documents you provided. This can be useful if you need to refer back to the audit later. Ask About Next Steps – Determine the timeline for a decision, whether you should submit more paperwork, or if 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 asks for mileage verification, give the log and a statement that the mileage was calculated using the IRS standard mileage rate.

Home‑Office

- Submit a floor plan or photo that illustrates the dedicated space.

- Demonstrate that the space is used solely for business (e.g., a schedule of business activities conducted there).

- Determine the deduction using the simplified or 期末 節税対策 regular method; present the math.

Charitable Contributions

- Retain the original receipt or a bank statement indicating the transfer.

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

- Keep a calendar of the donation event to confirm the date is within the tax year.

Meals & Entertainment

- Attach the receipt, date, attendees, and a concise note explaining the business purpose.

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

- If claiming a 50% deduction, confirm 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.

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

After the Audit

Review the Auditor’s Findings – The auditor will issue a written report. Read it closely to confirm no errors occurred.

Respond Promptly – If you disagree with a finding, send a written objection or appeal in accordance with IRS procedures.

Keep Updated Records – Even when the audit is resolved, retain the documentation for the period required by IRS rules (generally three years, or longer for specific deductions).

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

Practical Tips for Future Audits

- Quarterly Reviews – Perform a brief quarterly audit of your expenses to spot discrepancies early.

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

- Tax Advisor Check‑In – Have a tax advisor examine your return before filing.

- Keep a "Defensive" File – Keep a dedicated folder for high‑risk deductions to pull up quickly if questioned.

Defending Your Deductions Is a Skill

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