Review and Examination of 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.

1. Review the cost segregation study for accuracy and risk analysis

2. Reconcile cost basis of property to cost basis in the taxpayer's "books"

3. Evaluate the study to assess the audit's potential

4. Request all necessary documents needed for examination

5. Interview preparer of the study for additional details

6. Conduct inspection of property, if necessary

7. Verify property classifications and recovery periods

8. Review relevant court cases, rulings and regulations to ensure the study's legal analysis corresponds with the current body of law

9. Conduct a cost analysis to verify the construction costs used are appropriate

10. If needed, meet with taxpayer to ensure possible concerns are addressed 11. Prepare and issue final report

If necessary: 

12. For new construction projects, confirm indirect costs are accounted for appropriately

13. If sampling techniques were used, enlist the expertise of Computer Audit Specialist (CAS)

14. 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: