Legal Q - May/June 2007
By: Susan Berson

Q: I was audited and still haven’t received the notice of assessment for the tax the auditor said I’d probably owe. I’m trying to make plans to pay it and am wondering how long should it take the IRS to send it?

A: In practice, the time frame for receiving the notice of proposed assessment (the notice showing how much you owe post-audit) depends upon the auditor’s workload. This is because there is no standard time period for when the IRS must issue the notice of proposed assessment, except that it should be sent in time to allow the IRS to assess the tax owed before the statute of limitations expires. Typically, once the auditor has everything to address the issues raised in the audit, it takes about 30 days. The process is that the auditor has a computer program to prepare the calculations and prepare the written notice, however, approval must be obtained from the group manager before the notice is sent. If an issue is one of first impression for the auditor, the auditor may also speak with other levels of the IRS, such as IRS attorneys, to determine the wording of the notice. Be prepared that the notice of proposed assessment usually does not include the interest computation. This can be confusing because oftentimes taxpayers mistakenly believe that the amount listed on the notice is the total of what must be paid. If the notice you receive omits the interest, ask the auditor to compute the interest to a certain date, if you plan on paying it. The auditor must do a separate computation for that using a separate program. The IRS is supposed to be working on including interest computations in the notices, but at present, there are still two different computer programs being used; consequently, the notices still do not contain the interest computation.

Q: What kind of records do I need to support deductions for various charitable donations I made last year?

A: The Pension Protection Act included new rules concerning deductions taken for cash or monetary and non-cash donations made to charity. For clothing and household items donated to charity after August 17, 2006, the taxpayer must be able to show that they were in “good used condition or better.” If a qualified appraisal is obtained and filed with the taxpayer’s return, a deduction of more than $500 for any single item, regardless of its condition, may be claimed. Examples of household items are appliances, electronics, furniture and linens. For cash donations made after August 17, 2006, you must have a bank record or written communication from the charity that details the amount of the contribution, the date the donation was made and the name of the charity. Examples of bank records include canceled checks, account statements and credit card statements. However, the bank statements must reflect the name of the charity, as well as the date and amount of the donation and credit card statements have to include the transaction posting date. For monetary donations prior to August 17, 2006, the old law applies, allowing taxpayers to offer personal bank registers, diaries or notes made at the time of the donation as sufficient documentation for the deduction. For taxpayers that file returns on a calendar-year basis, the new rule applies to contributions made beginning in 2007.