Posted April 2, 2012 at 3:45 am
by Andrea Coombes
An unexpected letter from the Internal Revenue Service can make your stomach drop, but you can take steps to reduce your audit risk.
Taxpayers overall face a low audit risk: The IRS audited 1.1% of all individual tax returns filed in 2010, or 1.6 million returns of 141 million filed.
The vast majority of those audits—1.2 million—were done by mail. Just 392,000 involved an in-person meeting with the IRS. That’s not necessarily good news. Taxpayers often are confused by IRS correspondence, and with such audits they don’t have the benefit of working with one single agent, the National Taxpayer Advocate says.
But the risk of an audit skyrockets for some. Fully 12.5% of taxpayers whose income topped $1 million faced an audit. And self-employed people who filed a Schedule C with gross receipts of $100,000 or more faced an audit rate of about 4%—four times higher than average taxpayers.
Here are seven red flags:
Sole proprietors filing a Schedule C can reduce their audit risk by sticking to the facts—or at least making sure their expenses and income are not dramatically different from similar businesses.
For example, one Chicago-based hot-dog-stand owner said his [continue]….
Posted February 16, 2012 at 2:22 am
by Simon Black
The Foreign Account Tax Compliance act, or FATCA, is one of the most arrogant pieces of legislation ever conceived. President Obama signed the Act into law in 2010, and there are a some key provisions that are important to understand.
Reporting Requirements of US Tax Serfs holding Foreign Financial Assets
According to the IRS, “FATCA requires certain U.S. taxpayers holding foreign financial assets with an aggregate value exceeding $50,000 to report certain information about those assets on a new form (Form 8938) that must be attached to the taxpayer’s annual tax return.”
In other words, the law extends the existing reporting and disclosure requirements for US citizens and residents holding certain assets abroad.
Reporting Requirements of Foreign Financial Institutions
This is the part that’s really arrogant. The US government is requiring any foreign organization it deems to be a “financial institution” to enter into an information-sharing agreement with the IRS.
Posted November 17, 2011 at 1:32 am
by Harry Newton
They sent my Tax Return back! AGAIN!
In response to the question: “List all my dependents?” I had written:
+ 12 million illegal immigrants;
+ 3 million crack heads;
+ 42 million unemployable people on food stamps,
+ 2 million people in over 243 prisons;
+ Half of Mexico ; and
+ 535 fools in the U.S. House and Senate.
Apparently, this was NOT an acceptable answer.
For more on Harry, read his A 13-step investment philosophy for today’s times post
Posted October 27, 2011 at 1:29 am
by Kelly Phillips Erb
Over the years, I’ve represented a lot of clients. I’ve listened to hours and hours of IRS hold music. And I’ve had a lot of conversations with IRS reps and agents. But last week something happened that truly shocked me: the IRS hung up on me. On purpose.
The details aren’t all that important. Basically, I called the IRS to discuss a client’s tax matter. While it’s my job to zealously protect the rights of my clients, I am very aware that the person on the end of the line is also doing their job, and as such, I am professional when I speak to the IRS. On this day, I did exactly that.
I didn’t raise my voice. I wasn’t nasty. I merely tried to explain that there appeared to have been a cross in communications when the agent cut in abruptly with a brusque “This is how we do it” and then, Click.
I was actually rendered speechless. If you’ve met me, you’ll understand that’s quite the feat.
I called back, only to find that there is no way to [continue]…
Posted September 22, 2011 at 3:51 pm
Everything you need to know about IRC Section 6050W
Starting in 2011, all US payment providers including PayPal will be required by the Internal Revenue Service (IRS) to report sales information to the IRS about certain customers who receive payments for the sale of goods or services through PayPal.
We want to help you understand these changes.
Applies to sellers receiving over $20,000 in gross payment volume AND over 200 payments Applies only for sales on or after January 1, 2011
Posted August 13, 2010 at 12:50 am
Everyone must pay federal income taxes, but you also can contest many Internal Revenue Service tax bills. When you disagree with the IRS, procedure is important. You must pay attention to the order in which notices arrive and the specific ways in which you can respond. Here are 10 things you should know:
1. Most Audits are Via Correspondence
Most audits these days don’t involve…