The Internal Revenue System (IRS) fortifies its efforts in discovering and collecting tax returns and frauds. “The IRS aims to detect tax return differences which can eventually result to an audit,” said David Gannaway, tax litigation consultant of Marks Paneth and Shron, a New York accounting firm.
According to a recent survey conducted by the Oversight Board of the IRS, the concerted efforts to rectify tax return inaccuracies are prompted by a volatile and weak economic conditions. It is roughly estimated that thirteen percent of the tax payers say yes to tax cheating which is significantly higher than nine percent in 2008. The White House appoints the Oversight Board to monitor and supervise the IRS.
Tax analysts infer that taxpayers who are in deep financial struggles are more likely to indulge in fraudulent tax returns. The IRS is now looking into major search engines like Goggle and other social networking websites like Facebook in order to catch those people who are guilty of tax frauds. The IRS is also on the lookout for those who are into business and self-employment. They hope that they can elicit more information and eventually get bugger sums of money from the hidden stash of certain individuals. This is what they do to catch those people who engage in fraudulent tax returns.
For those who are consistently honest in filing their tax returns, they need not worry. But they also said that being scrutinized by the IRS is like being studied under a microscope. It is a very stressful and draining experience for many people. They also do not want to undergo through all the hassles and emotional stress during an audit. That is why it is always a good practice to declare honestly all your income in order to avoid this kind of issue. Be transparent and responsible when you present your tax returns.
Here are some useful tips on how to avoid the audit this year.
• Include all your income. Bear in mind that the IRS will always make a comparison between the 1099 and W-2s forms you received. Deductions which are not legal is seen as a simple mistake. But when you hide an income which you are fully aware of will always be considered illegal or fraudulent.
• Unusual deductions must be well documented. Gannaway said that it is the usual practice of the IRS to tweak certain tax returns once they notice that there are specific deductions which are not consistent with the income level. According to CCH, cited an example to illustrate this situation. CCH is a tax research institution. For instance, a taxpayer who earns between $50,000 to $100,00 deducts $6,690 in their medical expenses, $5,822 for interests, and $2,612 in some charitable donations in the year 2007. In circumstances when a taxpayer encounters a serious medical injury or lives in a place where there is a high tax rate, he or she can always claim legitimate deductions even way above the usual average. If this is the case, it should always be recorded and documented.
• Keep records of deductions if you are self-employed. During the global economic recession, a lot of individuals resort to self-employment. Some have set up their own business while the others choose to have their own consultancy firm. But the IRS is quite smart because they audit small businesses with a higher rate. When you are running a sideline business, you have the legal right to make deductions from all the expenses incurred from your business. These include lunch with clients, postage, printing, furniture, and office equipments. Gather and keep all the pertinent records and receipts. Then make some preparations should you need to defend each of those expenses.
• Take one step at a time during audit. The auditing process starts with a letter which focus on one aspect of a tax return. If you keep copies of all related information, then procure your own version and then also give IRS their own copy. When they request for a review or even a meeting in order to asks more questions about your overall tax return, then you can ask professional help to represent you. You can hire a tax lawyer, a CPA or certified public accountant, or even an agent. These people are all experts and competent to defend you and they will present your issues to your advantage. So do not hesitate to seek professional assistance if this happens.