What Should You Do? – Tax Trouble
When having a home office was not as common as it is today, it was believed that it was a red flag for the IRS to conduct an audit. As having a home office became more common, this myth is no longer true.
However, the IRS does not look the other way when it comes to deductions for having a home office. It has to make sense to them in their review. If they feel you have some how claimed deduction improperly you can rest assure they will look into it.
Tip for Filing Tax Returns #1: Avoid IRS Problems at All Cost If you can’t afford to pay you tax bill in this troubled economy, know that the IRS offers payment options for struggling taxpayers. You can contact the IRS directly for tax help, however, it’s best to consult with a highly qualified tax relief professional first, especially if you owe $25,000 or more, have multiple years of unfiled returns or the IRS wants to audit you, who can help you increase your chances of potentially reducing what you owe and avoiding further IRS penalties.
With the IRS’s enforcement budget at a record $5.5 billion, the most important tip for tax planning this year is to be prepared to file a complete and accurate income tax return to reduce your chances of an audit. This includes understanding how to reduce your tax liability including taking advantage of tax credits, as well as being smart about doing everything in your ability to reduce the chances that your return will be selected for audit, which would cost you much more in the long run.
Even if you have filed and received your tax return, you can still be audited by the IRS if they get a tax return from someone else who has named you and the information does not match your tax return. Let’s not also forget that the IRS can audit a tax return up to three years after it is received.
Tip for Filing Tax Returns #3: If You Already Have IRS Problems, Stop Procrastinating The worst thing you can do is ignore your tax problems. And with tax hikes planned for 2011, you need to get your own house in order now. If you have unfiled tax returns and/or you currently owe the IRS money, deal with it now before the new tax hikes kick in. Once you are liable for higher taxes, your penalties and interests will only increase with any subsequent unpaid taxes. If you have failed to file taxes in the past and feel like the IRS is breathing down your back, there is tax relief available. Regardless of what you’ve heard, you have the right to file your original tax return, no matter how late. With the rising deficit and growing tax gap, collecting funds through more aggressive collection tactics by the IRS will be politically more appealing than raising taxes – so taxpayers beware! Not to mention, the IRS will not entertain any type of tax debt settlement or payment plan to settle your back taxes until you have filed all legally required tax returns
Inflating the value of expenses or assets if not advisable. This is a sure fire way to get into tax trouble. That also includes the money you donate to church and charities.
Tip for Filing Tax Returns #5: Know Your Rights as a Taxpayer With IRS enforcement at an all time high, we can expect the number of IRS audits to continue to rise for both individuals as well as business owners. Every taxpayer has the fundamental rights of due process, fairness and representation- even if the auditor “forgets” to explain this to you. A tax relief professional knows your rights inside and out – so be sure you have someone on your side who knows how to preserve those rights. Additionally, recent reports have revealed that due to the number of new collection and audit cases (added to the already existing ones) the IRS finds themselves having a difficult time keeping up with an increased caseload and can no longer resolve taxpayer problems in a timely manner. So taxpayers are at a disadvantage when trying to take matters in their own hands. In these cases, taxpayers will want to consider a qualified tax relief professional to be their advocate and effectively protect their taxpayer rights. Think about it: You wouldn’t go to court without a lawyer. So be prepared to know your rights as a taxpayer, or get expert help from a tax attorney or Certified Tax Resolution Specialist who can represent you in front of the IRS, or other State taxing Agency, handling all communications and correspondence, allowing you to continue on with your life.
Harris Smith is a writer on personal finance education. Her article tackles the pros and cons of home equity line of credit