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IRS audits can be stressful, time consuming and, in some cases, expensive. This article provides an overview of how to approach an IRS audit.

The

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

first step is always to gather information. Taxpayers should start by locating their tax returns for the tax year being audited and the tax year prior and

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

subsequent to the tax year being audited. Taxpayers should then look for documentation to support any tax deduction or tax credit that they claimed on th

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

ese tax returns.

Particular attention should be paid to expenses listed on Schedules E (for investment property) and C (for small businesses) and items li

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

ted on Schedule A (assuming that the taxpayer opted not to itemize their deductions). Mileage expenses, charitable gifts, contract labor, cost of goods so

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

ld, and other unusually large items will draw the IRS auditor’s scrutiny.

Also, taxpayers should double check the items of income on the tax returns to ve

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

rify that they did not omit any items from their tax return. Taxpayers often discover that they omitted interest or dividend payments from small savings o

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

r brokerage accounts. In many cases taxpayers fail to report these items due to the investment company failing to send out the required tax documents to t

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

e taxpayer. Taxpayers should be prepare to explain any unreported income.

Having copies of each of these items to provide to the IRS examiner can prove v

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

ery helpful in resolving an IRS audit in a timely manner.

Taxpayers can expect that the IRS examiner will want to meet at the taxpayers house and/or busin

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

ess. The idea is that the IRS can ask the taxpayer to go fishing for additional documentation when they are in these locations. That is why it can be hel

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

pful for taxpayers to request to meet at the IRS examiners office.

Taxpayers should also be advised that the IRS examiner’s job is to assess the most tax

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

ossible. Unfortunately, many taxpayers forget this fact as the IRS audit progresses. The result is typically a notice of proposed adjustment mailed to th

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

e taxpayer a month after the IRS audit that is completely out of sync with what the taxpayer expected. To avoid this, taxpayers must always recognize the

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

IRS examiner’s role and the taxpayer must be proactive in asking questions and determining what EXACTLY the IRS examiner needs to allow the taxpayer’s dedu

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

ctions and credits.

Assuming that there are no items of unreported income and the taxpayer is able to substantiate all of their tax deductions and credits

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

then the IRS audit should be fairly straightforward. If the taxpayer is not able to substantiate deductions or credits or items of unreported income are

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

involved or the IRS audit uncovers these items, taxpayers should immediately consult with an experienced

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

tax attorney. The same goes for tax periods in which the taxpayer did not file tax returns. The relatively modest cost for an experienced

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

arget="_new"href=http://www.irstaxtrouble.com>tax attorney can significantly reduce the amount of tax that the taxpayer may end up having to pay

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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