IRS Audit Triggers – IRS red flags

IRS tax audit triggers – IRS red flags

With tax season underway, many taxpayers are starting to gear up in preparation of their tax returns. Some are starting early in hopes of a substantial tax refund. Many other taxpayers will procrastinate due to having to owe the federal government. One thing is for certain, all taxpayers want to avoid these IRS tax audit triggers at all costs.

Many think IRS tax audits are quite common, but they actually are not. Less than 1 % of all returns were audited in 2015. Unfortunately, the IRS does not have an exact list of automatic tax audit triggers, but we certainly should be aware of certain scenarios.  Here are the 6 biggest IRS tax audit triggers.

1. Failure to report all income from all sources. An audit is certainly triggered when income from all sources are not reported on your tax return. But, how will the IRS know, you ask? Income is reported to the IRS whenever you receive a W-2 or 1099 from a business.

And just because you do not have a W-2 or 1099 does not mean you do not have to report this income. You must be vigilant in obtaining these forms and contact your employers or business owners to obtain them. Keeping your address updated is always smart to ensure receipt of these very important tax documents during tax time.

Also, if an error is found on an income form, be sure to correct it with the business who will then correct it with the IRS. If it is not corrected, the IRS will only go off of the information that was reported to them.

2. Your business operated at a loss or had substantial or disproportionate business deductions. Unfortunately, Schedule C filers are targets because it is all too easy to abuse certain business tax deductions. There is a high probability that a tax audit will be triggered if your business deductions are disproportionately large compared to your income from your business.
If this is the case and all deductions are accurate, make sure you have all substantiations for the deduction(s) taken. Additionally, a tax audit will almost always be triggered when you are operating at a loss for more than three years or more.

3. You had substantial charitable deductions. Just as with business deductions, if they are disproportionately large as compared to your income, they will be suspect. Make sure to keep detailed records of your cash and property contributions.

4. You failed to report your foreign accounts. If you do not report your overseas accounts, you may face severe IRS penalties and an IRS tax audit.
FinCEN Form 114 (“FBAR”) is due by April 15th to report any foreign accounts with an extension available to October 15. It applies to: Any U.S. person, whether an individual or an entity, with a financial interest in or signature authority over one or more foreign bank or financial accounts must file an FBAR when the aggregate value of the accounts exceeds $10,000 at any time during the year.

5. You took rental property losses. The IRS is extremely tough on taxpayers claiming to be real estate professionals. In order to fully deduct these losses, you must be a real estate professional or be an active participant in the renting of your property. To be exact, real estate professionals must materially participate in real estate with over 750 hours each year and spend more than 50% of their working hours in real estate. These types of losses are heavily scrutinized by the IRS, and the rules to take them are quite strict. Be sure you qualify. Better yet, hire a tax attorney to make sure you do.

In the case that you are not a real estate professional or if you do not qualify, you may deduct up to $25,000 of property loss, which starts to phase out once your income reaches $100,000.

6. You earned more than one million. According to the Internal Revenue Service Data Book 2015, returns with income of $100k to $199k were audited at a rate of .64% versus returns with income of $1 million to $5 million being audited at a much higher rate of 8.42%. So, if you make more than one million, you pretty much have a target on your back.

Protect yourself and hire a tax attorney if facing an IRS tax audit. Arming yourself with a tax lawyer provides immense reassurance that you are fully represented by someone with the knowledge and ability to analyze the many complexities in the tax law. There are several options to consider if you come up with tax debt, including an IRS installment agreement or an offer in compromise.

The Los Angeles Tax Attorneys at Delia Law have many years of tax resolution experience and will competently represent you before the IRS. Please call for a no-cost tax attorney consultation at (310) 494-0100. We look forward to helping you.
This blog post is not intended as legal advice and should be considered general information about IRS Tax audit triggers only

The post IRS Audit Triggers – IRS red flags appeared first on Delia Tax Attorneys.

from Delia Tax Attorneys http://ift.tt/2jzUUMl
via IFTTT

IRS Tax Audit

IRS Tax Audits And Appeals

What should I do if I get an IRS tax audit notice?
No one likes the idea of a tax audit. It can make a taxpayer fearful, frustrated and just plain embarrassed thinking that the IRS is questioning whether their tax return is accurate. It is a difficult time and being investigated in this manner isn’t easy. It is important to stay calm and realize, it is just that, an investigation. At the time your tax audit notice is received, you have done nothing wrong, but you just have to prove it.

Should I call the IRS tax auditor before I talk with a tax attorney?

It is never a good idea to call the auditor without adequate preparation and legal representation. They will immediately start asking a number of questions and one misstep could lead them to expand your audit into multiple years or multiple issues. You should always look into hiring a tax attorney to handle the discussions and the tax audit.

Hire a Los Angeles tax attorney for your IRS tax audit

The benefit of hiring a tax attorney is confidentiality. Attorneys are all bound by the attorney client privilege meaning they may not reveal confidences shared with them by their clients. This is called the attorney client privilege. CPA’s and enrolled agents do not afford this type of protection. These professionals may be forced to reveal your private information if taxing authorities demand it.

Other advantages in hiring a tax attorney for your tax audit include:

• ability to limit the scope of your audit to one year. Many times IRS auditors try to expand the audit as more information is revealed. If you don’t have the proper representation, you could be opening yourself up to many other issues and multiple years.
• experience to know what the problem areas are and how to limit exposure to those areas resulting in less tax owed.
• knowledge and ability to analyze the many complexities in the tax law. The types of skills tax attorneys possess can make a substantial difference in the amount of money you may owe or save from the outcome of your tax audit.
• personal attention. Your case will always be handled by an experienced tax audit attorney who will be your primary point of contact. You will never be handed off to a less knowledgeable representative.

Resolve your tax debt after audit

After an IRS audit, there may be tax debt as a result of lack of proof to support your audited tax return. Los Angeles Tax Attorneys at Delia Law strives to obtain the best results for our clients during an audit. If this is the case, an offer in compromise is one of the best resolution options out there.  A successful offer in compromise negotiated by an experienced tax attorney can allow you to settle your tax debt for less than you owe. If it is found that you do not qualify for an offer in compromise there are other tax resolutions, such as an IRS payment plan.
Contact Delia Law for a free consultation
Delia Law can assist you with your tax audit and with any further resolution. For tax audit representation, you can contact a Delia Law Tax Attorney either by completing our online form or by calling (310) 494-0100. We can assist you wherever you live or you can visit a Delia Law Los Angeles tax attorney at 10880 Wilshire Blvd, Suite 1101. We also serve clients in San Diego, Orange County, as well as those across California and throughout the United States.
This IRS tax audit post is not intended as legal advice and should be considered general information only.

The post IRS Tax Audit appeared first on Delia Tax Attorneys.

from Delia Tax Attorneys http://ift.tt/2bBNwKl
via IFTTT

Form 941-x Late on payroll taxes and under payment of taxes

Form 941-x Late on Payroll taxes? Found an underpayment error? Here’s how to correct it without paying fines.

Employers can have a hard time keeping track of the complex rules of supplemental wages, deferred compensation plans, and other compensation arrangements.  Mistakes can be made when completing an employee’s taxable wages and calculating FICA payroll tax and income tax withholding. If an error is discovered, employers should act quickly to correct employment tax reporting errors and make an interest-free adjustment, in line with IRC section 6205 and 6414.

The IRS regulations state that “an error is ascertained when the employer has sufficient knowledge of the error to be able to correct it.” To make timely corrections, follow the directions below:

1. Employer files a quarterly employment tax return and finds an error that result in an underpayment or overpayment of employment tax.
2. Employer completes Form 941-X – Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund to correct the error through an interest-free adjustment. Form 941X relates line-by-line with Form 941, the Employer’s Quarterly Federal Tax Return.  You can file Form 941-X at any time when you discover an error, rather than having to wait to file it at the end of the quarter with the next employment tax return.
3. Employer files Form 941-X by the due date for the quarterly period when the error is discovered. This filing essentially amends the original quarterly employment tax return. See the chart below showing the corresponding “X” forms listed below to correct employment tax errors as soon as they are discovered.
4. To request an IRS Tax abatement of assessed penalties and interest, employer must fill out and submit Form 843.

Form 941-X Download Some helpful hints in filling out

• Form 941-X can only be used for one quarter.  If there are errors in additional quarters, separate forms must be used and filled out.
• Written consent must be obtained from each employee if the error concerns employee withholding.  Each employee must certify that they will not claim a refund or credit for any over-collection.
• On Form 941-X, for each item, the total corrected amount must be filled out along with the previously reported amount, and the difference.
• A detailed explanation must be provided of how you arrived at the corrected amounts.
• For legal guidance in correcting payroll errors:  (1) Treasury Decision 9405 (TD 9405) was issued to amend the process for making interest-free adjustments of employment taxes under sections 6413 and 6205, and claiming refunds of employment taxes under sections 6402 and 6414.  (2)  Revenue Ruling 2009-39 applies the interest-free adjustment and claim for refund processes under the final regulations issued by Treasury Decision 9405 (TD 9405).

The following table is an IRS guide to the corresponding forms in amending employment taxes errors:

Form 941X Series Adjusted Tax Forms

Return previously filed	Corresponding 94X series form
Form 941, Employer’s Quarterly Federal Tax Return (PDF)	Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund (PDF), Instructions (PDF)
Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees (PDF)	Form 943-X, Adjusted Employer’s Annual Federal Tax Return for Agricultural Employees or Claim for Refund(PDF), Instructions (PDF)
Form 944, Employer’s Annual Federal Tax Return (PDF)	Form 944-X, Adjusted Employer’s Annual Federal Tax Return or Claim for Refund (PDF), Instructions (PDF)
Form 945, Annual Return of Withheld Federal Income Tax (PDF)	Form 945-X, Adjusted Annual Return of Withheld Federal Income Tax or Claim for Refund (PDF), Instructions (PDF)
Form CT-1, Employer’s Annual Railroad Retirement Tax Return(PDF)	Form CT-1X, Adjusted Employer’s Annual Railroad Retirement Tax Return or Claim for Refund (PDF),Instructions (PDF)

The majority of errors are found after the close of the calendar year, when wages are already paid to an employee, so correcting an error in the current quarter should be a relatively easy process. However, the timing of these types of errors can lead to confusion and possibly more mistakes.

If an error is found, it should be corrected as soon as possible because the IRS will inevitably start an investigation and determine interest and penalties. The IRS takes Payroll tax debt very seriously.  To make sure the entire process is completed without mistakes, it is advisable to hire a tax attorney for help.  Please call for a no-cost tax attorney consultation at (619) 639-3336.

This blog post is not intended as legal advice and should be considered general information only.

The post Form 941-x Late on payroll taxes and under payment of taxes appeared first on Delia Tax Attorneys.

from Delia Tax Attorneys http://ift.tt/29KBeNI
via IFTTT

Liked on YouTube: Online Trading Announces Calgary Day Trading Course September 13 -15

Liked on YouTube: Online Trading Announces Calgary Day Trading Course September 13 -15 http://youtu.be/KmQ2UYCsSqE

Liked on YouTube: Calgary Day Trading Course October 2015

Liked on YouTube: Calgary Day Trading Course October 2015 http://youtu.be/KZgz2LulYyo

Liked on YouTube: Professional Tax Attorney in San Diego

Liked on YouTube: Professional Tax Attorney in San Diego http://youtu.be/ffVAlvSXQSc

Liked on YouTube: Long Term Oil Readings on Stock Market

Liked on YouTube: Long Term Oil Readings on Stock Market http://youtu.be/0eGey2_95Os