Never ignore a letter from the IRS. Sometimes you can solve the problem by sending more information, and sometimes you need a professional.
By now you’ve sent in your tax returns (unless you filed for an extension), and you may have already received a refund check. If you’re lucky, that’s the only letter you’re going to get back from the Internal Revenue Service.
But some are not so lucky and wind up getting audited.
Seventy percent of audits are just a letter asking for more information about your tax returns, and you’re asked to mail back forms proving your income or deductions. In other cases you’ll get an invitation to meet with an agent to discuss your tax forms, a scenario that sends many taxpayers into a panic.
In either case, there’s usually little need for panic, but there are certain steps you should take. To find out the best (and worst) course of action in the event of an audit, we talked to a certified public accountant and a tax lawyer, both of whom have worked for the IRS. Here’s what they told us you should do if you get that dreaded letter.
Doing business when you travel can grant you a tax break on your journey, but make sure to document everything.
How would you like to take a one-month trip all over Asia and Hawaii and write it off on your tax return? One of TaxMama’s clients did. Even after having the trip audited, the IRS agreed to allow all the expenses. Do you want to know the secret?
Repeat TaxMama’s mantra after me: document, document, document.
The simple secret to all tax-deductible expenses is keeping excellent records and documenting your business intentions, business purpose, and business-related activities.
Mary had always wanted to visit China. So this experienced film-set designer pitched a film producer working on a film about China. Once he accepted her proposal, she went to work. Mary started building her contacts in China -- the embassy, museums, artists, etc. She arranged for introductions to people whose homes or estates she could visit and photograph. The embassy helped Mary with a guide to organize her research.
Agency has $164.6 million in unclaimed refunds. If you're expecting a check, make sure the IRS has your correct address.
What could you do with $1,471?
That's the average amount of the tax refund checks that were returned in fiscal 2010 to the Internal Revenue Service because they were undeliverable.
Whether your unclaimed refund is less or more, any amount would be nice as your bills roll in.
In all, as of November 2010, the IRS had 111,893 refund checks totaling $164.6 million in missing money.
The main reason the checks were returned is simple: The taxpayers moved after filing their tax returns and forgot to give the IRS their new addresses.
No one wants to be audited, but following some simple guidelines can make the process less painful -- and maybe less expensive.
Talking with the IRS is no one’s idea of a picnic, but there are plenty of ways to make it more like a walk in the park than a slog through a murky, dangerous swamp.
Whether the IRS is auditing you, or you’re trying to work out a payment plan on a big tax bill, meeting an agent face-to-face -- and all the fear and resentment that situation may bring -- can lead taxpayers to make serious missteps, experts say.
The good news is audits are relatively rare: Just 1.1% of individual returns filed in 2009 were audited in fiscal year 2010, and 78% of those audits were by mail, not in person, according to the IRS. Still, that’s a not-insignificant 1.6 million returns. Taxpayers with heftier earnings should be more worried: 8.4% of returns with income above $1 million were audited.
Meanwhile, if it’s a big tax bill you’re struggling with, remember that if you owe $25,000 or less, you’re likely eligible for an installment plan. You can request one online. See more on this IRS page.
If the IRS does contact you, avoid some common taxpayer mistakes to make sure you keep your tax pain to a minimum.
Obama reiterates call for repeal after GOP leader says he was willing to 'take a look at' the multibillion-dollar subsidies.
This article is by Jim Kunhenn of The Associated Press.
Amid rising gasoline prices at the pump, President Barack Obama urged congressional leaders Tuesday to take steps to repeal oil industry tax breaks, reiterating a call he made in his 2012 budget proposal earlier this year. The White House conceded his plan would do nothing in the short term to lower gas prices.
The president wrote a letter to the bipartisan congressional leadership on Tuesday, a day after Republican House Speaker John Boehner said he was willing to "take a look at" repealing the multibillion-dollar tax subsidies enjoyed by the major oil companies.
Rising gas prices have become a political weight for the White House, with polls showing that as the cost rises at the pump, the president's approval ratings have slipped. Obama has increasingly sought to display action on oil, even as he acknowledges that there is no immediate answer to stem costs
"High oil and gasoline prices are weighing on the minds and pocketbooks of every American family," Obama wrote. But he also added that "there is no silver bullet to address rising gas prices in the short term."
Obama's proposal, spelled out in his past two budget plans, would eliminate a number of tax breaks for oil companies that would generate an estimated $4 billion a year in additional revenue.
Congress may be ready to talk tax reform, but are Americans ready to talk about ending tax breaks that save them money?
Most of America's taxpayers finished up their federal tax returns April 18.
But a Washington, D.C., tax think tank says that for tax year 2010 almost half of us don't owe the federal government any income taxes.
Around 45% of U.S. households, or about 69 million, will end up in this envious tax position, say Tax Policy Center researchers. Some of those folks will even get money back from Uncle Sam.
Percentage points-wise, that's slightly fewer folks who don't owe the IRS than in 2009. That year, the Tax Policy Center estimated that around 47% didn't owe income taxes.
While most of us pay at least something to Uncle Sam every year, some groups are exempt from federal taxes.
This post is by Mark P. Cussen of Investopedia.com.
Every year, millions of Americans patiently wait for weeks to receive all of their necessary tax data in the mail, dutifully gather them together and prepare their returns, and wistfully contemplate what they could have done with the dollars that went to Uncle Sam and their state governments.
But not everyone is subject to this process; there are some groups of people in America who have been exempted from this process under our tax code.
If you're wondering when taxes were started, read The History Of Taxes In The U.S.)
There are five main categories of taxpayers that are lucky enough to escape the tax man.
While Obama had the highest tax rate and gave the most to charity, his income his first year in office was millions more than Bush or Clinton.
By Jim Wang, Bargaineering
I always look forward to the annual ritual of the White House releasing the president’s tax return because it feeds one of my guilty pleasures -- financial voyeurism. This year is no different as pundits pick apart the 2010 tax return and look to draw conclusions about the president’s financial life.
In this article, however, I intend to do something slightly different. I'm going to compare President Obama’s return with the returns of former Presidents George W. Bush and Bill Clinton, using their first year in office. For my analysis, I leaned on the archives at Tax Analysts, which saved the releases as they were made available.
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