IRS Request to extend the statute of limitations for 2002

[Bjorn]

The IRS wrote me a letter asking if I would extend he 2002 statute of limitations with a form 872.

The unique record keeping system is simply bank statements and canceled checks payable to this vet or that feed store. There are virtually no reciepts, expect for a major expense of a fixed asset fence. There are no checks to Walmart or other stores that would imply personal items being deducted. The IRS is asking for invoices, etc. We do have proof but not in the ideal format.

What rights are lost if we don't sign. What rights are gained if we do sign?

Thanks.

[JON]

Authorties throw out

Normally, the IRS will through out deductions in question and issue their report of taxes due bases on their adjustments.

[taxmandan]

Extension on statute

How long did they ask for on the extension? If they want more than 6 months, I would offer that amount of time, no need to extend for longer than that. Like Jon said if you refuse, they will just disallow the deductions and make the adjustment to tax. You then go to appeals, which is where you are likely to end up anyway, with a Form 872 audit.

[jimmcg]

jim mcg

Agree with former post, do not give them an indefinite extension. Six months is plenty for most situations. Also don't forget the Cohan Rule in which the Second US Circuit Court of Appeals allowed an approximation of busines expenses based on credible evidence other than actual documentation.........Don't have case cite handy perhaps someone else does?

[jainen]

the upper hand

I kind of see the IRS point of view here. Claiming you can't get a printout from a veterinarian sounds like stalling. Checks don't show much about the business purpose of expenses. The fact is, if your client doesn't keep receipts then it isn't a very business-like operation. Receipts are the most basic thing in business records. IRS is being pretty lenient, offering you more time. I recommend you accept and cooperate with them, because they clearly have the upper hand in this.