|
Back Issues |
|
Business & Finance
Small
Business Resources: Tax time is approaching. ... As you gather together your bills and receipts, forms and schedules, then begin to calculate those deductions, you may want to ask yourself a simple question:
Those of you who file Schedule C or Schedule F, or who itemize, already know what a chore tax time can be. ... But just think what a chore it could become if the IRS flags your return for an audit. Of course, reports have indicated that IRS audits have fallen to nearly half of what they'd been in the mid-90's. Possibly, that's due to the new face the IRS has put on since they came under fire from Congress. Or maybe it has to do with the fact that the IRS has been too busy housekeeping, since it's consistently flunked its own audits by the General Accounting Office [GAO] over the past several years. Whatever the reason for the decrease in the number of audits, however, you still don't want to get reeled in for one yourself. ... Don't forget. Audits are down, not out. How the audit bait gets hooked ... In the simplest possible terms, the IRS has established a series of formulas for most of the items on most of the forms and schedules we have to file at tax time. For audits, they've set relationships between adjusted gross income and the total amount of deductions a filer may take. ... Fall in one zone of these relationships, and it's green all the way -- you're unlikely to get audited. Fall in the next zone, and your return may well bring up a yellow caution flag, and you increase your odds of finding an unwelcome letter in your mailbox. Fall in the red zone, and you may as well break out the spreadsheets, cardboard boxes, and a call to your accountant. The IRS is almost certainly going to pick you. And, trust us, It's one lottery you don't want to win. ... How to know the odds ... Strangely enough, since the IRS uses formulas, you can actually make some educated guesses about what amount of deductions is more or less likely to trigger an audit. Rather than go through the complicated math, however, how's this for convenience? ... A couple of years back, ABC News published a few tax audit calculators on the web as part of their 1998 tax filing features. You won't find them by browsing the ABC News web site any longer. But, last time we checked {Feb 7th}, all three were still up and running. ...
As the site notes, the calculators are "based on the work of Dr. Amir Aczel, a statistics professor who was himself once subjected to a lengthy tax audit." To use the forms, you simply enter values for Gross Income {Schedule C, line 7; Schedule F, line 11; or 1040, line 31}, then plug in the total for your expenses or deductions {Schedule C, line 28; Schedule F, line 35; or Schedule A, line 28} ... and, voilá! The calculators will return a bit of info telling you whether you're "unlikely" to come up for an audit, whether you "may," or whether you're "almost certain to be flagged." According to ABC News, Aczel claimed that 90 percent of audits are spurred by large deductions relative to income as reported on these forms ..." What if your legitimate deductions still mean you're likely to be flagged? There's absolutely no reason why you should take anything less than the deductions or expenses you're legitimately entitled to. But if you find that the amount of those deductions might trigger an audit, you can always take at least one precaution. It's not foolproof for avoiding an audit; but it can help.
This won't stave off an audit for sure. But if you are audited, you'll have your records in that much better shape. Finally, if you think the IRS is in error, or they make a determination you think isn't justified, you can always turn to the still-new Taxpayer Advocate's office for help. Part of the federal push to make the IRS more friendly, the Taxpayer Advocate can often help iron things out considerably more quickly than the numerous different IRS employees you're likely to encounter over the phone. The long and the short of it is this: If you have any questions, just call, write, or drop us an e-mail {at business@downstreetmagazine.com}. We'd be happy to give you our 2˘, no hassles, no obligations.
******* ******* If you would like to submit an article for our Small Business Resources section, don't hesitate to let us know. Simply e-mail us at business@downstreetmagazine.com. The e-mail should contain your name, address, and a phone number where we can reach you. You may also send a copy of your proposed article. The text can either be included in the body of the e-mail, or you can send it as an attachment in just about any word processing format. If your piece is accepted, we will pay a small honorarium for your interest & your time. [See Freelancers Wanted for more details.] ******* ******* If you would like to advertise in this section, or throughout the magazine, please visit our Advertising Info Pages ... or call, write, or e-mail ads@downstreetmagazine.com. ******* ******* . |
|
*******
******* ******* ******* For more information, contact DownStreet Magazine by ...
Phone
(802) 453-5124 All
material copyrighted © 2000-2001. All rights
reserved. |
