Tax Talk - The 20/20 tax resolution blog

Company.com, a  has come up with 10 ways to reduce your risk of an audit.  It is important to note that there is no foolproof guide to avoiding an audit, but by following these ten tips your risks could be diminished.

1.       Make your business a business, not a hobby. If you are in your third year of business and reporting a third year of losses, that’s going to raise a red flag with the Internal Revenue Service. Despite what you might think, the IRS isn’t evil, and if you show them the evidence, they’ll understand that you’re a loss-making small business — for a while. If you’re in year four and still making a loss, expect a call from the IRS about when you plan to start earning money.

2.       Report your income accurately. If a client pays you $3250 for a service you provide, and you round that down to $3000 while your client reports the actual number, that’s a red flag, too. It tells the IRS that you’re not keeping accurate records — and they do cross-check that stuff.

3.       If you use a CPA or tax preparer, understand what they’re doing and why. If you’re uncomfortable with something, ask them to explain it till you are comfortable or they do it your way (as long as it’s legal.) Why would you do that? You do it because you’re responsible for the accuracy of your company’s tax return, even if someone else prepares it — and that means that you, not your preparer, will be liable for any additional taxes, interest charges, and penalties if you get audited. If your tax preparer promises to save you a huge amount of money, don’t trust it. The only way to save huge amounts is to cheat.

4.       Prepare to be audited from the first of the year to the last. If you keep your receipts, journal your expenses and mileage as they are incurred, and keep accurate records of your income, you’ll be able to show that you’re not guessing at your numbers. Show the IRS auditor that you can’t get the easy stuff right and you’re just inviting a more thorough examination of your finances. Mark Green, IRS Spokesperson for Georgia, told company.com that keeping good records of expenses as you incur them is “a must” for all businesses.

5.       “Pay estimated taxes if you’re a sole proprietor or independent contractor. Pay them on time, and keep them current.” Green said.

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The current economic downturn was tough on many businesses in 2009.  The IRS’s 2009 collection statistics, which were released in January, bear this out.  In 2009, the IRS collected $48.9 billion, which represents a 13 percent decrease in collections from 2008 when the IRS collected $56.4 billion.  Although the amount collected in 2009 decreased, the level of enforced collection actually increased.  The number of liens issued by the IRS increased approximately 25 percent from 768,168 in 2008 to 965,618 in 2009.  Likewise, the number of levies issued by the IRS increased approximately 32 percent from 2,631,038 in 2008 to 4,478,181 in 2009.

As the effects of the economic downturn were felt by everyone, it appears the number of businesses and individuals that fell out of compliance with the IRS increased.  However, the ability to repay those liabilities decreased, despite the increase in enforced collection.  It is likely that the number of taxpayers owing money to the IRS and the number of liens filed in response will remain high and may even continue to increase through 2010.

Susan Taylor Martin of the St. Petersburg Times wrote a very interesting article on the U.S. anti-IRS sentiment that has been brewing in the collective American psyche for nearly half a century. Martin’s article was in response to the Texas software engineer who recently flew a plane into the Austin IRS building after years of being disgruntled by the existence of the IRS.  Also recently in the news was the Ohio man who bulldozed his home after the IRS placed liens on his properties and was facing foreclosure.  Thankfully, this type of destruction is a rare occurrence and, as Martin’s article points out, is representative of an extreme example of the existing anti-IRS sentiment.

However, this “sentiment” has presented itself enough times that the IRS has developed a separate agency, The Treasury Inspector General for Tax Administration (TIGTA), to handle the threats directed at the IRS. All TIGTA’s investigations from 2004 through 2010 are listed directly on TIGTA’s website with highlights of the numerous threats, bribes, and criminal behavior directed towards the IRS.

Over the years 20/20 Tax Resolution has seen thousands of businesses and individuals in extremely stressful conditions as a result of their back tax scenarios with the IRS and State tax authorities.  Owing back taxes is never an easy position to be in, but there are logical and rational approaches to address the situation.  Contacting a tax professional for guidance is the best first step.

We understand that owing back taxes in any amount can be scary and emotionally draining.  But they’re called back taxes for a reason.  Everyday with 20/20 Tax Resolution’s guidance, support, and partnership, our clients get to move forward with that taxing emotional weight lifted from their lives.  We get results and want you to be a part of our successes.

There are thousands of 20/20 Tax Resolution success stories.  Here’s a recent one:

Click on the picture at the beginning of this post and you’ll see an agreement that 20/20 Tax Resolution recently negotiated with the IRS for a client.  This client came to us owing over $175,000 in back taxes to the IRS.  His case was assigned to a Revenue Officer who had levied his bank accounts multiple times and was threatening a garnishment.  20/20 Tax Resolution was able to quickly assess the situation, prevent additional collection enforcement, and negotiate a $500 monthly Installment Agreement that will potentially save our client over $100,000 as the statute of limitations will expire long before the total debt is paid.

If you have any questions or need any assistance please contact us for a free consultation.

Now is the time to move forward with your life.

It’s well known that on January 12^th a series of earthquakes measuring 6.5 to 7.3 on the Richter scale devastated the nation of Haiti.  20/20 immediately looked to our employees and the American Red Cross as a way to support the emergency relief and recovery efforts by providing financial support.

20/20 initiated a Haiti Red Ribbon Week campaign to raise donations for the victims of the earthquake.  We are proud of the way in which 20/20 was able to quickly mobilize and do our part to make a difference.  20/20 is committed to assisting those in need in our communities locally and around the world. 

For more information about how you can participate in the American Red Cross relief efforts please contact the Red Cross directly via this link.

According to the Associated Press:

Federal workers owed the government more than $3 billion in back income taxes in 2008, just as federal tax revenues started to suffer from the recession.

More than 276,000 federal employees and retirees owed back income taxes as of Sept. 30, 2008, according to data from the Internal Revenue Service. The $3.04 billion owed was up from $2.7 billion owed by federal employees and retirees in 2007.

Among cabinet agencies, the Department of Housing and Urban Development had the highest delinquency rate, at just over 4 percent. The Treasury Department, which includes the IRS, had the lowest delinquency rate, at 0.98 percent.

Overall, the 9.7 million federal workers included in the data had a delinquency rate of about 2.9 percent.

“It’s not right for a few to shirk their obligations, and it’s especially offensive that these tax delinquencies come from federal employees and contractors,” said Sen. Chuck Grassley of Iowa, the top Republican on the Senate Finance Committee.

The IRS doesn’t provide a comparable delinquency rate for income taxes paid by the public. The nation’s overall compliance rate, which includes taxes paid by small businesses and corporations, has hovered around 85 percent for decades, according to IRS statistics.

Most residents who owe back income taxes file returns but cannot pay the full amount at tax time, said IRS spokesman Anthony Burke. Others have their tax bills increased through audits and cannot pay the higher bill.

Continue reading here….

Still looking for that last minute holiday gift?  Don’t worry 20/20 has done the research necessary for you to get those tax-themed gifts out the door.

1040 IRS toilet paper:

According to www.prankplace.com this product isn’t deductible, but it’ll sure make you feel better. A collage of the 1040 IRS Form is printed throughout the whole roll!

Set up a 529 account:

According to David McPherson of ABC News.com ,”Thinking about buying a savings bond for Junior’s college fund? I say forget it, and instead help fund a 529 college savings plan. U.S. savings bonds are more trouble than they’re worth with a long list of peculiar rules.

A 529 plan offers far more flexibility, including higher contribution limits and the ability to transfer account balances among family members. To learn more about 529 plans, check out Savingforcollege.com.

Stick The IRS! Board Game:

This Monopoly-style game can be found here.  Enjoy the family fun watching players have a chance to receive “annual reports” that determine whether the tax shelter investment made them rich or, as in most “real life” shelters, turn out to be a bust.

Boost Your 401(k) Contribution Rate (A gift to yourself and your future):

According to Carla Fried of CBS MoneyWatch.com, “…contact H.R. or your plan administrator and boost your contribution rate by a percentage point. Or two. Or three. You know full well that you will not go off the deep end when your take-home pay takes a slight dip. So just do it.  Now.  No more excuses.  How much is enough? Well, setting aside 10 percent of pre-tax income for retirement is good; 15 percent is ideal.”

We realize that some of these suggestions are gags, but owing back taxes is no laughing matter.  If you or someone you know has back tax issues with any taxing authority, start 2010 on the right path.  Give the gift of a financially secure road map to the future.  Please contact 20/20 Tax Resolution today for a free consultation.

Happy Holidays to you all from us here at 20/20 Tax Resolution.

We at 20/20 just wrapped up our most successful Annual Holiday Food Drive to date.  Our goal was to collect donations for families in need in our own community and distribute our contributions through The Community Food Share organization.

Last year was a tremendous success, bringing in 550 pounds of food and cash donations gifted to Community Food Share from all of our employees.  But we knew we could do more.  This year we gathered almost 590 pounds of food and increased our cash contributions over 350% from last year.  This adds up to a helpful 2,870 meals for our community.

According to Community Food Share, the majority of folks who receive food assistance are working families with children.  We’re proud to be making a difference in our community in these uncertain and difficult economic times.

Now is about the time that time of year that people begin thinking about all the things to do for filing a federal income tax return.

Have you ever wondered if there is a convenient one-stop resource to locate answers to all the questions you have regarding any new IRS changes in laws, regulations, credits, or deductions?

The good news is that the Internal Revenue Service has a comprehensive Publication 17, Your Federal Income Tax that highlights all the ways to take advantage of the newest tax credits available in 2009.  Specifically, you’ll find information on making work pay credits, American opportunity education credits, earned income credits, first-time home buyer credits, energy credits for homeowners, and numerous other credits that can help save money.

The downside is that this publication is over a whopping 300 pages. Publication 17 in its entirety can be accessed directly via the IRS website in PDF format.  However, we found that the best way to digest the information to ensure that you obtain all the necessary details is to use the IRS’ interactive guide that has over 6,000 links to answer all your questions.

Most importantly, it is recommended that you consult with an expert regarding all the planning necessary to complete your 2009 tax return.  If you have any questions about how these credits will be interpreted in the face of a back tax liability contact us at 20/20 for your free consultation.

We wish you well in this tax planning and holiday season!

Over the years 20/20 Tax Resolution has shown a strong commitment to giving back to the communities in which we live and work. We’ve worked with Habitat For Humanity, Community Food Share, BalSwan, and various other national and local organizations. We’re always looking forward to the opportunities to partner with charities and donate our time and resources to those in need.

Our most recent initiative was focused on the Make a Child Smile Organization which was started in 1998 to encourage others to write letters to children suffering from a chronic or life-threatening illness. Each month new children are featured on their website to be the recipients of the emotional and financial support of people all over the world.

20/20 took the opportunity to raise money, provide gifts, and write letters to brighten the lives of the children and their families. Since then, we’ve received touching letters from the families of the children and can feel the true impact of our service.

We encourage you to learn more about Make a Child Smile as well as the other organizations that we have worked with in hopes to get as many involved as possible. If you have any suggestions for us for our next charity event we’d love to hear from you.