Here are four ways to make an audit easier for you and your accountant.
Tag Archives: irs tax audit
Five More Tips For Amending Tax Returns (Forbes)
– Following up on 5 Simple Rules to Follow When Amending Your Tax Return, here are five more tax return amendment tips:
IRS Announces More Flexible Offer-in-Compromise Terms to Help a Greater Number of Struggling Taxpayers Make a Fresh Start
– The Internal Revenue Service today announced another expansion of its “Fresh Start” initiative by offering more flexible terms to its Offer in Compromise (OIC) program that will enable some of the most financially distressed taxpayers to clear up their tax problems and in many cases more quickly than in the past.
“This phase of Fresh Start will assist some taxpayers who have faced the most financial hardship in recent years,” said IRS Commissioner Doug Shulman. “It is part of our multiyear effort to help taxpayers who are struggling to make ends meet.”
Today’s announcement focuses on the financial analysis used to determine which taxpayers qualify for an OIC. This announcement also enables some taxpayers to resolve their tax problems in as little as two years compared to four or five years in the past.
In certain circumstances, the changes announced today include:
- Revising the calculation for the taxpayer’s future income.
- Allowing taxpayers to repay their student loans.
- Allowing taxpayers to pay state and local delinquent taxes.
- Expanding the Allowable Living Expense allowance category and amount.
In general, an OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. An OIC is generally not accepted if the IRS believes the liability can be paid in full as a lump sum or a through payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination of the taxpayer’s reasonable collection potential. OICs are subject to acceptance on legal requirements.
The IRS recognizes that many taxpayers are still struggling to pay their bills so the agency has been working to put in place common-sense changes to the OIC program to more closely reflect real-world situations.
When the IRS calculates a taxpayer’s reasonable collection potential, it will now look at only one year of future income for offers paid in five or fewer months, down from four years, and two years of future income for offers paid in six to 24 months, down from five years. All offers must be fully paid within 24 months of the date the offer is accepted. The Form 656-B, Offer in Compromise Booklet, and Form 656, Offer in Compromise, has been revised to reflect the changes.
Other changes to the program include narrowed parameters and clarification of when a dissipated asset will be included in the calculation of reasonable collection potential. In addition, equity in income producing assets generally will not be included in the calculation of reasonable collection potential for on-going businesses.
Allowable Living Expenses
The Allowable Living Expense standards are used in cases requiring financial analysis to determine a taxpayer’s ability to pay. The standard allowances provide consistency and fairness in collection determinations by incorporating average expenditures for basic necessities for citizens in similar geographic areas. These standards are used when evaluating installment agreement and offer in compromise requests.
The National Standard miscellaneous allowance has been expanded to include additional items. Taxpayers can use the miscellaneous allowance for expenses such as credit card payments and bank fees and charges.
Guidance has also been clarified to allow payments for loans guaranteed by the federal government for the taxpayer’s post-high school education. In addition, payments for delinquent state and local taxes may be allowed based on percentage basis of tax owed to the state and IRS.
This is another in a series of steps to help struggling taxpayers under the Fresh Start initiative.
In 2008, IRS announced lien relief for taxpayers trying to refinance or sell a home. The IRS added new flexibility for taxpayers facing payment or collection problems in 2009. The IRS made changes to lien policies in 2011 and expanded the threshold for small businesses to resolve tax issues through installment agreements. And, earlier this year, the IRS increased the threshold for a streamlined installment agreement allowing individual taxpayers to set up an installment agreement without providing a significant amount of financial information.
As always we are here to help with any questions, stress, or confusion the IRS might be causing you. We speak tax so you don’t have to. We are your financial partners, and we are always here to help.
STS Financial Tips & Tax Due Dates for May 2012
– When to Review Your Life Insurance Coverage
- Marriage or divorce;
- Birth or adoption, or acquiring a financial dependent such as a parent;
- Children leaving for college;
- Children “leaving the nest”;
- Purchase or sale of a home;
- Serious illness;
- Substantial growth or depletion of assets;
- Retirement; and
- Start-up of a business.
Tip: In addition to the amount of coverage, you may need to make a change relating to beneficiaries, policy ownership, or type of coverage.
Tip: Most informers are disgruntled employees and former spouses or lovers.
Tax Due Dates for May 2012
May 10
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Employers – Social Security, Medicare, and withheld income tax. File Form 941 for the first quarter of 2012. This due date applies only if you deposited the tax for the quarter in full and on time.
Employees – who work for tips. If you received $20 or more in tips during April, report them to your employer. You can use Form 4070.
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May 15
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Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in April.
Employers – Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in April.
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Don’t Get Audited! The IRS’s Dirty Dozen Red Flags (Daily Finance)
Making Too Much Money
Failing to Report All Taxable Income
Taking Large Charitable Deductions
Claiming the Home Office Deduction
Claiming Rental Losses
Deducting Business Meals, Travel and Entertainment
Claiming 100% Business Use of a Vehicle
Writing off a Loss for a Hobby Activity
Running a Cash Business
Failing to Report a Foreign Bank Account
Engaging in Currency Transactions
Taking Higher-than-Average Deductions
If your confused or have questions, please contact us. We’ll help you figure it out. We speak tax, so you don’t have to. Give us a call today.
IRS to Host Public Meeting Dec. 8 on Real-Time Tax System
The Internal Revenue Service will kick off a series of public meetings Thursday, Dec. 8 to gather feedback on how to implement a series of long-term changes to the tax system described by IRS Commissioner Doug Shulman in an April 2011 speech at the National Press Club. In that speech, the Commissioner described a vision where the IRS would move away from the traditional “look back” model of compliance, and instead perform substantially more “real time,” or upfront matching of tax returns when they are first filed with the IRS. The goal of this initiative is to improve the tax filing process by reducing burden for taxpayers and improving overall compliance upfront.
Under the vision of a real-time tax system, the IRS could match information submitted on a tax return with third-party information right up front during processing and could provide the opportunity for taxpayers to fix the tax return before acceptance if it contains data that does not match IRS records.
By contrast, today the IRS conducts a significant number of compliance activities months after the tax return has been filed and processed. It is not uncommon for a taxpayer to receive a notice 12 to 18 months after a tax return is filed. This after-the-fact compliance approach can create problems and frustrations for both taxpayers and the IRS.
At the public meetings, IRS officials will solicit feedback and input from outside stakeholders to provide comments and insight. The first meeting will feature representatives of consumer groups, the tax professional community and government representatives. A future public meeting will include, among others, representatives of the employer and payroll community, the software industry, financial institutions and additional government representatives.
The first meeting, scheduled at 9:00 a.m. on Dec. 8, will take place at the IRS Headquarters Building Auditorium, 1111 Constitution Ave., NW, Washington, D.C. Those who would like to attend the meeting should e-mail the IRS at CL.NPL.Communications@irs.gov with the contact information for the attendees or call the IRS at 202-622-3359.
The next public meeting will be held early next year.
Tips for Recently Married or Divorced Taxpayers
Newlyweds and the recently divorced should ensure the name on their tax return matches the name registered with the Social Security Administration (SSA). A mismatch could unexpectedly increase a tax bill or reduce the size of any refund.
- For recently married taxpayers, the tax scenario begins when the bride says “I do.” If she takes her husband’s last name, but doesn’t tell the SSA about the name change, complications may arise. For example, if the couple files a joint tax return with the bride’s new name, the IRS computers will not be able to match the new name with the Social Security number.
- After a divorce, a woman who had taken her husband’s name and made that change known to the SSA should contact the SSA if she goes back to her previous name.
If you have any questions related to your requirements to the IRS after getting married or divorced, or need help changing your name with the SSA, give us a call. We’re happy to help.
Moving Soon? Let the IRS Know
If you changed your home or business address, notify the IRS to ensure that you receive any refunds or correspondence. Although the IRS uses the postal service’s change of address files to update taxpayer addresses, notifying the IRS directly is still a good idea.
There are several ways to do this.
- On your tax return. You may correct the address legibly on the mailing label that comes with your tax package or write the new address in the appropriate boxes on your tax return when you file.
- Form 8822. You may use Form 8822, Change of Address, to submit an address or name change at any time during the year.
- Verbal Notification. If an IRS employee contacts you about your account, you may verbally provide a change of address.
- Written Notification. To give written notification, write to the IRS center where you file your return and provide your new address. The addresses for the IRS centers are listed in the tax instructions. In order to process an address change, the IRS will need your full name, old and new addresses, your Social Security number or employer identification number, and signatures. If you filed a joint return, you should provide the same information for both spouses. If you filed a joint return and have since established separate residences, you each should notify the IRS of your new addresses.
It’s a good idea to notify your employer of your new address so that you can get your W-2 forms on time.
If you change your address after filing your return, don’t forget to notify the post office at your old address so your mail can be forwarded.
You should also notify the IRS if you make estimated tax payments and you change your address during the year. You should mail a completed Form 8822, Change of Address, or write the IRS center where you file your return. You can continue to use your old pre-printed payment vouchers until the IRS sends you new ones. However, do not correct the address on the old voucher.
Double Check Your Withholdings
With less than two months remaining in the calendar year, it’s a great time to double check your federal withholding to make sure enough taxes are being taken out of your pay.
The average refund for 2010 was just over $3,000. Although in part due to tax credits associated with the economic stimulus package, it’s still an increase of nearly 10 percent from the previous year. In addition, even though the Making Work Pay Tax Credit lowered tax withholding rates in 2010 for millions of American households, some workers and retirees still need to take steps to make sure enough tax is being taken out of their checks.
Certain folks should pay particular attention to their withholding. These include:
- Married couples with two incomes
- Individuals with multiple jobs
- Dependents
- Some Social Security recipients who work
- Workers who do not have valid Social Security numbers
- Retirees who receive pension payments
Taxpayers who wind up owing too much tax because not enough money was withheld from their paychecks during 2011 may qualify for special relief on a penalty that sometimes applies. Depending on their personal situation, some people could have less withheld from their paychecks than they need or want.
Failure to adjust withholding could result in potentially smaller refunds or, in limited instances, a taxpayer may owe tax rather than receive a refund next year.
If you’re not sure how much you need to withhold from your paycheck, just give us a call and we’ll figure it out with you.