Posts Tagged ‘Tax’

Civil and Criminal Tax Evasion

March 27, 2014

Jail and money

The difference between tax avoidance and tax evasion?  About 5-10 years in jail.

However, there is a big difference between civil and criminal tax evasion

Civil tax evasion adds penalties to the tax that you owe.

Criminal tax evasion means jail time plus penalties and restitution.

So the difference is money or time or both.  Not worth the risk.

The IRS has a job to do just like you and me. That job is to enforce the laws that Congress enacted.

So, be as aggressive as you are comfortable with.  Hire a tax professional.

But remember that pigs get fat and hogs get slaughtered.

When Should You File Your Tax Return?

January 7, 2014

IRS ReturnThe IRS announced that it would begin accepting individual tax returns (Forms 1040 and 1041) on January 31, 2014.  Business returns (Forms 1120, 1120S and 1065 ) will start being accepted on Jan 13, 2014.  Unincorporated businesses that report their income on Form 1040 Schedule C, Schedule E or Schedule F are not included as business returns so the January 31 date applies.

When is the best time to file your tax return?  There is a simple answer.  That depends.

Many people want to file their returns early to get their refund back as soon as possible.  That is one consideration.  If you have a simple return and really need the money this is probably a good strategy for you.  And yet there are other considerations.

The earlier you file your return, the more months the IRS has to decide if there is something that needs further explanation.  More months of exposure to IRS examination.

And the later you file, the more returns are already in the audit pipeline when yours arrives.  This may reduce your audit exposure (but no guarantees).  Many of our clients pay their tax when they file their extension on April 15 but wait until October 15 to file the actual return for this very reason.

Look at all your personal factors and then decide what is best for you.  If you have a question, contact a tax professional.

Are You Ready?

October 23, 2013

Selected for AuditOur tax software vendor just let us know that “According to IRS tax gap studies, small businesses account for 40% of the $450 billion annual loss in tax revenue to the US Treasury, largely due to the under-reporting of income and overstating of credits and deductions. As a result, the IRS focuses much of its audit activity on small businesses, especially in field audit examinations.”  Let’s see, 40% of $450 billion (with a “B”)…that is not pocket change.

However, this is really not surprising.   Small business has always been a prime target for the IRS.  Many times the business owner is good at creating and delivering their product or service but not quite as good at the administrative side.  So if you were the IRS, would you audit a well-prepared business that  has their records in perfect shape and understands the tax law or would you go after the under-prepared small business owner.  Hmmmm.  Let me think.

The IRS will tell you that their goal is to determine the correct tax liability (whatever that means).   However, if they can disallow a deduction because of bad records or no records, it is much easier and faster than spending hours going through records and arguing tax law with a Taxpayer or their representative.

I had an IRS Appeals Officer once tell me that more deductions were disallowed because of inadequate records than for tax law interpretations.  This has been the case since I was an IRS Agent and will probably continue until people learn to keep better records.  The most frequently disallowed deductions are vehicle expenses, meals & entertainment and travel simply because the required documentation is clearly defined in the Internal Revenue Code (The Law).

Are you ready for an IRS Audit?  You only have one chance with the Auditor to show the credibility of your records.  If you fail that first impression, you should prepare to spend a lot of time with the Auditor and write a sizable check at the end .

Records don’t have to be complicated to be credible.  Ask yourself “Am I willing to spend a little time on keeping records NOW that will save me considerable money and time in the future?” Good records can also  significantly add to your peace of mind.  Priceless.

MyTaxBuddy is a simple-to-use system that you use from your smartphone, tablet and computer and provides complete, IRS-credible records for all your income, activity and expenses, all in one place.  Having all the pieces required for travel, meals & entertainment and vehicle mileage documentation is not difficult if you can remember it all.  We provide the structure. MyTaxBuddy is as simple as using an online calendar.   If you start today it could save your bacon when the IRS comes calling.  That is why we are your Buddy!

It’s Show Time!!!

September 28, 2013

October 15If you filed an extension on April 15 to put off the filing of your 2012 Form 1040, just a little reminder.  The clock is ticking down to get your records together and prepare your tax return.  If you use a tax professional, do them a favor – don’t put it off until October 14.

But getting your tax records to your tax professional sooner rather than later is a great advantage for you.  This gives some time to actually go over the return and see if there is anything that can be done to reduce your tax bill or increase your refund.  The longer you put it off, the less time there is for strategy.

Actually you should be planning NOW for your 2013 tax return.  MyTaxBuddy.com has a subscriber that used our service to input all her 2012 tax records at one time.  She told us that it felt so good to have 2012 done that she decided to input all her 2013 records and is now staying current.  And she is enjoying the peace of mind in NOT having to think about being stressed out next year. We love happy subscribers.

If you dread the time when you have to battle your avalanche of receipts , do yourself a favor and start getting your tax records together now.  You can let go of the year-long dread that you carry around and, once you file your return, have the comfort of knowing that, when the IRS does call, your records are ready.    Wouldn’t that be a welcome change?

Similar Questions – Different Answers

September 21, 2013

Groucho SmartOn the surface, the questions “Can I deduct it?” and “Is it deductible?” seem very similar.  They are not.

“Can I deduct it?” means that a person has enough guts to put it on their tax return and risk the consequences if they are wrong.  It does not necessarily mean that there is any legal support to take the deduction.

“Is it deductible?” means the same as “Is there any legal justification for taking this deduction?”  A whole different question.

Many people get tax advice from “interesting” places – party talk, their stylist, realtor, mechanic, business associates, at church.  If you do get tax advice from those sources, be certain the person knows the actual tax law and have not just heard it somewhere then had the guts to deduct something on their own return.

Although a heart surgeon and a motorcycle mechanic both understand how systems work together to make a unit operate properly as a whole, I’m not letting my mechanic do heart surgery.

But I’m just funny that way.


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