Overview of Auditing a Cost Segregation Study
Did you know that the IRS Cost Segregation Audit Techniques Guide was created to aid auditors the review and examination of a cost segregation study? The best part is, is that it readily available for you to view on the world wide web! As the taxpayer and/or CPA, understanding the “other side” will give you a greater understanding of what goes on “behind the scenes.” The below steps are a high-level summary of the steps that the IRS auditor will typically execute while auditing a cost segregation study.
Review the cost segregation study for accuracy and risk analysis
Reconcile cost basis of property to cost basis in the taxpayer’s “books”
Evaluate the study to assess the audit’s potential
Request all necessary documents needed for examination
Interview preparer of the study for additional details
Conduct inspection of property, if necessary
Verify property classifications and recovery periods
Review relevant court cases, rulings and regulations to ensure the study’s legal analysis corresponds with the current body of law
Conduct a cost analysis to verify the construction costs used are appropriate
If needed, meet with taxpayer to ensure possible concerns are addressed
Prepare and issue final report
If necessary:
For new construction projects, confirm indirect costs are accounted for appropriately
If sampling techniques were used, enlist the expertise of Computer Audit Specialist (CAS)
If the taxpayer self-performed the construction of the project, ensure that §263A requirements are met
Want a full download of the IRS Cost Segregation Audit Techniques Guide? Download our free and simplified version here:
