Evaluate IRS Examination And Appeals Processes Practice Test

An individual taxpayer receives a notice proposing additional tax after the IRS disallows a portion of home office deductions claimed on Schedule C. The IRS examination is at the correspondence stage and requests proof of exclusive and regular use and how expenses were calculated. What documentation should the taxpayer provide to the IRS?

A business taxpayer is in an IRS initial inquiry where the Service requests confirmation of the taxpayer’s method of accounting and support for a large year-end accrual of expenses. The taxpayer uses the accrual method and accrued significant bonuses payable after year-end. Which factor would most likely affect the IRS's decision on whether the accrual is allowable in the year claimed?