Hi everyone,
I am representing two clients being audited by the IRS and am flabbergasted by the sampling techniques on both audits. In one case the auditor is requesting 100% of the substantiation for 5 of the biggest categories on the tax returns (COGS, Outside Services, etc).
In the other audit the auditor is requesting invoices, statements, and support for about 500 transactions. It seems that the auditor picked these 500 transactions by going through the GL and selecting items that appeared personal or may not have been inherently clear on the QB memo description, rather than selecting the sample size based on a random sample or other methodology.
I've pushed back requesting a less voluminous sample size in #1 and also considering pushing back on the sample methodology used in #2.
Curious if any of you had any experience specifically contesting the sample size and methodology used. Based on IRM 04-047-003 Statistical Sampling Auditing Techniques (https://www.irs.gov/irm/part4/irm_04-047-003) the methods used are not appropriate. Any suggestions would be much appreciated!
Thank you