Filing taxes is punishment enough without the vague threat of an IRS audit looming over our heads. For understandable reasons, the IRS insists on keeping the ins and outs of its auditing process on the murky side. How will you catch the bad guys if you give them the rule book first? But because of the sense of mystery around the process, it’s an area of regulation often misunderstood by taxpayers.
Here are a few common myths about the dreaded tax audit:
Myth #1: Only the wealthy get audited.
While it’s true that big businesses and the uber-rich are often targets of IRS tax probes, that doesn’t necessarily mean low- and middle-income workers are free and clear. The Read More
At least 21 financial advisers in Switzerland are charged with aiding American tax dodgers are at large. Fearing arrest if they leave Switzerland they essentially are imprisoned within the borders of that country.
For decades, Switzerland has occupied an outsize role in the world of shady international finance. The country’s strict secrecy laws have made it the offshore banking destination of choice for U.S. tax evaders. The Swiss Bankers Association estimates that Swiss banks still hold at least $2 trillion that customers haven’t declared to tax authorities in their home countries. They say that you’re not a self-respecting Swiss bank if you don’t have some dodgy money floating around your system. Read More
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So where a business has been treating its workers as independent contractors and there is a concern that the IRS in an audit would not respect this arrangement, what can the business do?
The business should consider entering into the IRS’ Voluntary Classification Settlement Program (VCSP). The VCSP is a voluntary program that provides an opportunity for taxpayers to reclassify their workers as employees for employment tax purposes for future tax periods with partial relief from federal employment taxes. To participate in this voluntary program, the taxpayer must meet certain eligibility requirements and apply to participate in the VCSP by filing Form 8952, Application for Voluntary Classification Settlement Program, and enter into a closing agreement with the IRS. Read More
I do not know of any business owner who wants to be audited by the IRS or their state tax authority. Audits can be simply random as “decided” by the IRS computer, or they can be triggered by certain characteristics of your business operation, for example how you’ve classified independent contractors or employees (especially if they apply for unemployment insurance, worker’s compensation benefits, or even welfare).
Do You Operate A Beauty Salon?
Here are three key items the IRS and state tax authorities look for if you are an independent contractor or if you use them in your business.
1. Is there a lease between the independent contractor and the owner? Read More
If the IRS asked to examine your business’ Federal Tax returns, would you survive the audit? For Jade Phuong who operates a nail salon, it was a nightmare that came very close to ending her business.
Before the IRS turned her world upside down, Jade already had beaten the odds as a small-business owner. Her nail salon had been operating more than eight years, a considerable accomplishment considering that most small businesses fail in less than three years. Living at home with her mother, Jade saved enough money to open her nail salon fresh out of nail school at age 25.
Despite a rocky start, Jade was able to build up her business and after a couple of years Read More
Tax planning: What’s the good news? It’s never a waste of time… there still are some tax breaks on the books that you can use to your advantage before the end of 2014. Some types of time or monetary investments have risks, but not tax-planning. This is why EVERYONE should do it.
The bad news is that there is no guarantee that all the extenders (there is more than 50 business and individual tax breaks) — including popular things such as the higher education tuition and fees deduction, and itemized claims for state and local sales taxes and private mortgage insurance payments — will be renewed after December 31, 2014. Lawmakers are expected to consider, or extend (hence the laws’ collective name) after the November 4th election. Read More
CPA’s and other professional tax return preparers are bound to the IRS Code Of Professional Responsibility commonly called Circular 230 which if a tax preparer violates could lead to big penalties and sanctions for that tax preparer.
What penalties could tax preparers face?
A tax preparer who is in violation of these rules could be subject to the following:
Internal Revenue Code § 6694(a) provides that if any part of an understatement of a taxpayer’s liability is due to an “unrealistic position” taken on his return, any income tax return preparer who knew (or reasonably should have known) of this position is subject to a penalty of $250. If the understatement is due to a reckless or intentional disregard of Read More
Now when I think of Halloween, I look forward to seeing all of the different costumes that people wear. Some are very extravagant and I am sure pricey. And for some they would like to know how that can be deductible. Since costumes fall under the category of clothing or uniforms, you need to be aware of what the tax law requires.
The tax law requires the following three elements for clothing useful only in the business environment to be deductible:
1. The clothing is required or essential in the taxpayer’s employment;
2. The clothing is not suitable for general or personal wear; and Read More
You can in fact deduct Halloween candy if you figure out a way to make it business related. The IRS doesn’t say a lot about this topic because they don’t want to give you “permission” to deduct these items, but they also have not specifically stated that you cannot deduct Halloween candy.
Here are five ways to deduct those over-priced bags of snack size chocolates:
1. Make a promotion out of it. Attach your business card or a promotional flyer to packets of M&M’s and voila! Deductible.
2. There are many companies who will print candy wrappers with your logo on it. An even better and more advanced way to promote your business and still have something for Read More
With Halloween coming up, it is just not the neighbor kids looking forward to trick or treat but also people pretending that they are the Internal Revenue Service looking to steal your identity and scam you for your money.
Listen to the story of Arati who works in New York City and immigrated to the U.S. from India. Arati received a call from a Brian Cruz who called her house early in the morning before Arati left for work. He left his telephone number, name and noted he was calling from the IRS. Arati put the number in her cell phone without searching for it online first. After all it had a 202 area code which is Washington D.C. so she figured it had to be official. Once she got into her car she called, and the man who picked up the call answered that this was the investigations bureau for the IRS. Arati asked for Cruz, but he Read More