What is the most common audit technique applied by the taxing authorities?
Governmental auditors are all taught to “take it to cash”. Commonly auditors will begin an audit by first assuring themselves they have identified all of the business, personal, checking, savings and investment accounts utilized by an individual or a business and its owners. They will then sum up all of the deposits into your business and personal accounts. Their attitude is that every deposit is taxable income unless you can prove otherwise. Therefore, it will be necessary for you to substantiate any non-taxable deposits such as those out of your personal savings, interbank transfers, borrowed capital or funds from other sources that are not taxable business income. The auditor will want to treat every withdrawal out of each of these accounts as non-deductible personal expenses unless you can prove otherwise. The auditor’s “take it to cash” approach is one of the strongest reasons why you need an experienced Tax Audit Attorney like David W. Klasing on your side so that you first under
