Judge Learned Hand once said that nobody owes a public duty to pay more (taxes) than the law demands. Hiring a good CPA will help you tax advantage of every deduction and tax strategy legally available to minimize your tax bill, while also protecting you from costly mistakes that may red flag the IRS.
Some of the more common deductions people miss are for health insurance premiums, sales tax on large purchases such as a car or boat, noncash charitable contributions, points on refinancing a home, investment expenses, higher education expenses, and casualty deductions.
From our experience the IRS tends to go after taxpayers, whom they feel they have the best chance to assess the most tax. Ironic that in this regard they operate like a business (trying to maximize profit). Here are some indicators to keep in mind:
* High Income – Once your income crosses $200,000 your chances of being audit increases.
* Large Itemized Deductions – If your itemized deductions are bigger than the IRS target range your chances increase for audit.
* Home Offices – You can only take a home office deduction if you meet all of the qualifications.
* Incomplete Tax Returns – The IRS receives copies of most 1099, W-2’s you receive and matches them to your tax return. Failure to include a 1099 could increase your chance of audit
* Business Losses – The IRS like to check to make sure business losses are legitimate
* Charitable Deductions - You'll need a canceled check or dated receipt for any cash contributions, and contributions of $250 or more require written acknowledgement from the charity. If you made a noncash contribution valued at more than $5,000, you'll need an expert appraisal to back up your claim.
We typically recommend keeping your returns for at least 7 years (and is some cases much longer).
For each tax year, a return must be made by a U.S. citizen or a resident alien who has at least a specified minimum amount of gross income. In most cases if your gross income is below these amounts, you do not have to file a return, the gross income requirements vary by age and marital status.
It depends. In certain situations the IRS will accept a request to abate penalties. Please consult us or another tax advisor.