If and individual is the subject of a full audit does the IRS deduct or include any items that would reduce your tax burden that were not included on your original return in any calculation for additional taxes due or penalties? E.g. say you are have business income as an sole proprietor (Sched C) and are audited for a specific year. The auditor goes through all your receipts and disallows $10K in travel expenses, but in the process you also discover and point out that you forgot to include an expense deduction (you produced the receipt) for $5k e.g. for professional fees. Will you have have to pay the taxes due and penalties on the
10K (and perhaps file an amended return to recoup the taxes on the 5K) or will the additional taxes and penalties due from the audit be on the net $5k?