Will you be audited?: The IRS recently
released the Fiscal Year 2007 IRS Enforcement and Service
Tables as well as the FY 2007 Enforcement Revenue and
Individual Audits Chart. Interesting
reading, especially if you play fast and loose with the tax
code (otherwise known as "audit lottery"). Basically, audits
and enforcement are up…in some cases substantially over
prior years. I doubt that this trend will be reversed in the
near future. There is much less compliance to the tax code,
primarily because of the complexity of the law and the fact
that tax preparers are virtually unregulated at either the
state or federal levels. It's always been astounding to me
that you have to have a license to cut somebody's hair, or
install their plumbing, or even apply makeup…but not to
prepare a federal or state tax return. Amazing.
What do I do if I receive a notice from the IRS about
Don’t panic! the first thing to do is carefully read
the notice—to determine why it was sent, what the IRS
is requesting, and what they want you to do. It may be
nothing of importance; it may even be a notice in your favor.
After reading it you should bring it to our attention.
How do I find out about my refund?
The best way is to use the Check Your Refund link from the
Resources pages of our website! To look up the status of your
federal or state refund, you will need your social security
number, filing status, and exact amount you’re
What do I need to bring when I am having my taxes
Following is a list of the more common items you should bring
if you have them.
§ Wage statements (Form W-2)
§ Pension, or retirement income (Forms 1099-R)
§ Dependents' Social Security numbers and dates of
§ Last year's tax return
§ Information on education expenses
§ Information on the sales of stocks and/or bonds
§ Self-employed business income and expenses
§ Lottery and/or gambling winnings and losses
§ State refund amount
§ Social Security and/or unemployment income
§ Income and expenses from rentals
§ Record of purchase or sale of real estate
§ Medical and dental expenses
§ Real estate and personal property taxes
§ Estimated taxes or foreign taxes paid
§ Cash and non-cash charitable donations
§ Mortgage or home equity loan interest paid (Form
§ Unreimbursed employment-related expenses
§ Job-related educational expenses
§ Child care expenses and provider information
And any other items that you think may be necessary for your
What are the consequences of early withdrawals from my
If you withdraw money from a 401(k) or an IRA before age 59
½, the distribution is taxable and there is a 10%
penalty on the taxable amount. The main exceptions
that let you withdraw money early without penalty are as
I haven’t been filing my tax returns what should
Qualified retirement plan distributions if you separated
from service in or after the year you reach age 55 (does
not apply to IRAs).
Distributions made as a part of a series of substantially
equal periodic payments (made at least annually) for your
life or the joint lives of you and your designated
Distributions due to total and permanent disability.
Distributions due to death (does not apply to modified
Qualified retirement plan distributions up to (1) the
amount you paid for unreimbursed medical expenses during
the year minus (2) 7.5% of your adjusted gross income for
IRA distributions made to unemployed individuals for health
IRA distributions made for higher education expenses.
IRA distributions made for the purchase of
a first home (up to $10,000).
Distributions due to an IRS levy on the qualified
Qualified distributions to reservists while serving on
active duty for at least 180 days.
First, you must determine if you were required to file in the
years you did not file. There are many different items that
could figure into this—such as your filing status, your
sources of income, whether you had any tax withheld, etc. This
is a link to the IRS instructions for filing requirements for
you determine you should have filed, contact us and we can
handle all of your prior year filings. It is very important
that you do not just continue to not file. If you owe money the
penalties for not filing are high. If you are owed a refund you
will lose your claim to it 3 years after the due date of the
Is my social security taxable?
Usually if your income including social security benefits is
less than $25,000 if single or $32,000 if married, your
benefits are not taxable. If your income is higher than those
limits, there are formulas to determine what percentage of your
social security is taxable. Currently up to 85% of your social
security may be taxable.
What are the tax consequences of selling a
If you sell your personal residence you can totally exclude
from income up to $250,000 of gain if you are single, or
$500,000 if married, regardless of your age at the time of the
sale—if during the 5 years before the sale you owned the
home and lived in it for a total of any 24 months. The
exclusion is not a one-time election; instead it is available
once every 2 years. Recent tax law has adversely changed the
handling of gains on the sale of a home if you rented the
property before you made it your personal residence. Please
contact our office if you believe this situation will affect
How should I keep records for my business
Keep a log in your vehicle and record the purpose and mileage
of each trip. You also need to record the odometer readings at
the beginning and end of each year, as the IRS will ask you for
total miles driven during the year. Keep your repair bills as
these normally record odometer readings when the car is
I owe the IRS money. What are my options?
If you can afford to pay the amount you owe, it should be
paid. But many times that is not the case. If you cannot
afford to pay, you have several options. Ignoring the IRS
should not be one of them!
Can I deduct expenses for a business run out of my
The first option is to enter into an installment agreement
with the IRS. To do this you need to fill out
9465, Installment Agreement Request.
This form is fairly easy to complete, but we strongly
recommend that if you owe a substantial amount of money you
work with us to secure your agreement.
The second option, which is much harder to get approved, is
an offer in compromise. The IRS will be reluctant to do
this if they feel you have the resources to eventually pay.
You should not attempt an offer in compromise without
professional help you can trust. The
IRS has also issued a consumer alert, advising taxpayers to
beware of promoters’ claims that tax debts can be
settled for “pennies on the dollar” through the
Offer in Compromise Program.
If you use a portion of your home for business purposes, you
may be able to take a home office deduction whether you are
self-employed or an employee. Expenses you may be able to
deduct for business use of your home may include the business
portion of real estate taxes, mortgage interest, rent,
utilities, insurance, depreciation, painting, and
You can claim this deduction only if you use a part of your
home regularly and exclusively:
As your principal place of business for any trade or
As a place to meet or deal with your patients, clients or
customers in the normal course of your trade or
Generally, the amount you can deduct depends on the
percentage of your home that you used for business. Your
deduction will be limited if your gross income from your
business is less than your total business expenses.