There are over ten thousand "Internal Revenue Code Sections" (IRC) Title 26 of the United States code. It is difficult to read and understand them all. However, most of your IRS representation will be on either income issues or expense items reported on a Schedule "C" of a 1040, a corporate return "1120", or a partnership tax return "1065".
From time to time you will encounter audits on "Charitable Contributions", "Dependents". "Alimony Paid" and so on.
Make sure you understand how to research an IRC. Here is a link: U.S. Code Collection. Let us assume you are searching for "Charitable Contributions"; Use the search form by inserting "Charitable Contributions", and you'll discover it is IRC Section 170.
Understanding the IRC is useful when preparing for the audit or appeals as discussed in the "IRS Expense Substantiation" or Bank Deposit Analysis for the IRS Audit sections of this topic.
You may further your knowledge by also referring to the Treasury Regulations. The Treasury Regulations is an expanded explanation of the IRC. For Example: IRC section 170 discusses contributions and the referring Treasury Regulation to that code will be Treasury Reg. 1.170. Here is a link, http://www.access.gpo.gov/cgi-bin/cfrassemble.cgi?title=200726
Furthermore, don't forget that IRS Publications are law as well on the IRS. During an audit or an appeal use them if need be. IRS Forms & Publications.
Most Audited Code Sections: IRC Section 61 (Income) & IRC Section 162 (Expense) |
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§ 61. Gross income defined: (a) General definition
Except as otherwise provided in this subtitle, gross income means all income from whatever source derived, including (but not limited to) the following items: More reading! |
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§ 162. Trade or business expenses: (a) In general
There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including— More reading! |
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Another one to mention is:
§ 183. Activities not engaged in for profit.
General rule
In the case of an activity engaged in by an individual or an S corporation, if such activity is not engaged in for profit, no deduction attributable to such activity shall be allowed under this chapter except as provided in this section. More reading! .
Many individuals or tax preparers will get creative by taking deductions, on a Schedule "C" of a hobby to reduce taxable income such as the write off of a piano and expense use of home deductions of a song writer!
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