Equine Tax Law

A More Aggressive IRS Approach in Audits

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The IRS is focusing more on audits in the farming, livestock and horse industries in which taxpayers are claiming six figures or more in tax deductions.   This often pertains to taxpayers who are employed full time in a profession, and operate the farm or other activity on a part-time basis, often relying on managers and contract employees.

These industries are quite varied in the methods of bookkeeping within each operation.   IRS agents are required to use its internal manual, the Audit Technique Guide, in auditing taxpayers engaged in farming and in the breeding, raising, buying, and selling of livestock or horses.   There are so many hurdles that, particularly in larger audits it is crucial to have experienced tax counsel or accountants participate in the audit.   And as previously mentioned, the IRS will always want to know if you have a business plan or a tax opinion letter that helps support your intention to be engaged in an activity for profit.

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