What is a Bank Deposits Reconstruction?
2019 – 11/04 The IRS can piece together a taxpayer’s income and deductible expenses if it suspects he or she didn’t correctly report them. That happened in one case when the IRS performed a “bank deposits reconstruction” of a married couple’s income. The wife was a doctor and her husband worked in her medical practice. The U.S. Tax Court ruled the IRS was justified in reconstructing the couple’s income because they’d failed to maintain adequate records and hadn’t responded to information requests. The IRS established their income via forms issued by Medicare and other information. The court stated the taxpayers’ argument that their income wasn’t accurately reflected was unsupported. (TC Memo 2019-142)