Earned Income Tax Credit (EITC) Information

How to Pay Zero Taxes by Jeff A. Schnepper

Fully updated to include all the latest tax law changes, How to Pay Zero Taxes outlines the easiest, most practical strategies you can use to lower your taxes this year, next year, and beyond. From converting personal expenses into business expenses to avoiding or surviving an IRS audit, Jeff Schnepper's guide comprehensively covers more deductions than any other tax book, all conveniently organized in six fast-access categories: exclusions, credits, “above-the-line” deductions, “below-the-line” deductions, traditional tax shelters, and supertax shelters.

Jeff A. Schnepper is the author of several books on finance and taxation, including How to Pay Zero Estate Taxes and all twenty-four previous editions of How to Pay Zero Taxes. He is a financial, tax, and legal advisor to the Transamerica sales force and runs a full-time accounting and legal practice in Cherry Hill, New Jersey. Mr. Schnepper is Microsoft's MSN MONEY tax expert, an economics editor for USA Today and is tax counsel for Haran, Watson & Company.

     

Earned Income Tax Credit (EITC) Information - Tax Audits Advise

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Earned Income Tax Credit (EITC) Information * Tax Audits Advise

Advice on Internal Revenue Service Audits   
Roni Deutch

It is important to keep in mind that the IRS computer system selects the returns that are audited, not human employees.

The computer system selects returns that are likely to yield the most money to the government and then are merely reviewed by an IRS agent. The computer system makes this decision by reviewing returns for “red flag” characteristics. Red flag characteristics are those income, deduction, and credit types that have historically seen the most imprecise calculations and abuse by taxpayers. Below is a list of common red flags their computer systems look for.

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None wage sources of income

A taxpayer is more likely to get audited if he or she generates income from any source other than regular employment wages. Persons who file Form 1099 are up to three times more likely to receive an audit then some one who only files Form 1040. A 1997 IRS press release claimed more then three percent of taxpayers filing Form 1099 reporting between $25,000 and $50,000 of income were audited, compared with under one percent of 1040 returns that were audited.

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Taking excessive deductions or credits

Although the IRS offers hundreds of possible deductions and credits to help taxpayers lower their income tax liability, taking an excessively large amount will send a very clear red flag to the IRS. But how does a taxpayer know what’s excessive? That’s a tricky question. There is no all-applying rule because the IRS determines the allowable number of deductions for a taxpayer mostly based on their income. For example, if a person making $30,000 per year claims $15,000 in charitable contributions, then this will send a red flag to the IRS.

Improper self-employment deductions

Although there are many tax laws allowing self-employed individuals to lower their liabilities by using home office deductions, taxpayers taking home office deductions are probably the most frequently contested by IRS because they are easy for a taxpayer to bend the truth on. In order to claim a home office deduction a taxpayer’s home office must be the principal place of business, meaning they perform most of their work in the home office. Also, the space must be used exclusively for running the business and not for personal use as well. Otherwise the space can’t be considered a home office and may not be deducted. The rules for home offices are very specific, so please be sure to read the IRS’s rules and regulations if your considering claiming a home office deduction.

Excessive business losses

Losses from a business can also be another red flag for the IRS. If an individual starts their own businesses for the purpose of generating excessive tax deductions, the IRS will catch on quickly. Businesses must be profitable in at least three of the past five years in order to be considered a legitimate business for tax purposes. Otherwise the IRS will realize the business is functioning as a tax shelter.

Noticeable inconsistencies from previous years

If there are big inconsistencies between your previous tax returns and your current return then you could be sending a red flag to the IRS. The most common examples are name changes (i.e. your name or the name of one of your dependents), claiming new deductions and credits, or a significant change in income. For example, if a taxpayer earned $75,000 one year, then only $15,000 the next, the IRS is going to wonder what happened.

Different information in local and federal returns

If there are differences in the income you reported to your state treasury and to the IRS then the IRS will investigate as to why the information reported is inconsistent. Not only do federal and state authorities receive records of all sources of income and financial information for every taxpayer, but the IRS does as well. If they notice any errors that point to misrepresentation of income then you can expect to receive a letter informing you of an audit.

Suspiciously low income

If your reported income seems suspiciously low for your given life style, then the IRS will see this inconsistency and may request an audit. Remember that the IRS has access to all your financial records and will notice if you are making a $5,000 monthly mortgage payment but only receiving $2,000 a month in reported wages. They are going to know you must be receiving income from another source and will investigate.

Sloppy or incomplete tax returns

If your tax returns are incomplete or sloppily prepared then this might also get the attention of the IRS. If there are blanks where there should be numbers or if most of the numbers you claim are round numbers (like $2,500 or $10,000) then this will also send up a red flag to the IRS.
There is no way to guarantee a taxpayer won’t be audited. However, if a taxpayer files an accurate tax return and avoid the IRS’s red flags their chances of being selected for an audit are much lower. Even if they are selected, having a clean and accurate tax return will help make the audit less cumbersome and intrusive.<p>
Visit the <a href="http://www.rdtc.com/blog">Roni Deutch Tax Center Tax Help Blog</a> for more information.

For over sixteen years, Roni Deutch has been recognized as an experienced tax attorney and founder of the nation's largest law firm dedicated to resolving IRS back taxes. Roni Deutch has always put the needs of her individual clients first, and by so doing has helped thousands of Americans find an end to their IRS tax nightmares. This experience, dedication and commitment to helping American taxpayers can now be found at the Roni Deutch Tax Center.

What Other Authors say about Taxes

Doing Your Taxes by Carl LaFresnaye

When an individual is younger, it is much easier to do taxes at the end of the year since there usually is not anyone to claim other than the individual him or herself, as well as the fact that not many...

Gambling Income and Expenses - Taxes by Richard A. Chapo

Hit a big one? With more and more gambling establishments, keep in mind the IRS requires people to report all gambling winnings as income on their tax return.Gambling income includes, but is not limited...

Why Do We Pay Taxes? by Carl LaFresnaye

As Benjamin Franklin famously said, nothing is certain except death and taxes. But where do taxes come from, and do we really need them? A History of Taxes The first recorded use of taxation was...

Income Tax Return Filing 101 by Glenn McDonald

The month of April rolls around and most of America is getting ready to prepare their income tax returns.Every year everyone who made an income are required to report income to the federal and state governments...

Do You Know When To File A Tax Return? by Ken Snowie

Every year, millions of Americans dread the inevitable; they have to gather all of their receipts and records and get ready to file their Federal Income Tax Returns. When was tax season first initiated?...

Use Child Tax Credit for Tax Savings by Keith Hoyng

Now, here's a real tax savings to the individual taxpayer with dependents. The child tax credit is a direct federal income tax credit based on the number of dependent children in your family. This federal...

Advice For Using Free Tax Forms by Carl LaFresnaye

There are many different avenues that can be used to obtain free tax forms from the government. There are usually free tax forms that can be found at the local libraries during tax season. There are...

A History of the Income Tax in the U.S. by Garry Gamber

After the United States declared its independence and fought the Revolutionary War, the U.S. Congress relied on excise taxes on alcohol, tobacco and a few other products for revenue to pay off its war...


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Each Mom is independent. Once a client starts working with a Mom, the client will keep the same “Mom” year after year regardless of where the client moves or relocates. Being in a “relaxed” environment has many advantages. Lower overhead, faster response time, more availability, etc.
To be a member a CPA Mom, Tax Moms, or an Erolled Moms the Tax Professional must ALWAYS be in good standing with their state licensing agency, experienced, and must demonstrate a high level of ethics, professionalism and proficiency.
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Since the “Moms” do taxes and accounting of all complexities, there is always a Mom available for every level of work. Since each Mom has a private 800 number, you are just a phone call away, regardless of where you live.
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Index of Articles about Taxes

What Other Authors say about Taxes

Doing Your Taxes by Carl LaFresnaye

When an individual is younger, it is much easier to do taxes at the end of the year since there usually is not anyone to claim other than the individual him or herself, as well as the fact that not many...

Gambling Income and Expenses - Taxes by Richard A. Chapo

Hit a big one? With more and more gambling establishments, keep in mind the IRS requires people to report all gambling winnings as income on their tax return.Gambling income includes, but is not limited...

Why Do We Pay Taxes? by Carl LaFresnaye

As Benjamin Franklin famously said, nothing is certain except death and taxes. But where do taxes come from, and do we really need them? A History of Taxes The first recorded use of taxation was...

Income Tax Return Filing 101 by Glenn McDonald

The month of April rolls around and most of America is getting ready to prepare their income tax returns.Every year everyone who made an income are required to report income to the federal and state governments...

Do You Know When To File A Tax Return? by Ken Snowie

Every year, millions of Americans dread the inevitable; they have to gather all of their receipts and records and get ready to file their Federal Income Tax Returns. When was tax season first initiated?...

Use Child Tax Credit for Tax Savings by Keith Hoyng

Now, here's a real tax savings to the individual taxpayer with dependents. The child tax credit is a direct federal income tax credit based on the number of dependent children in your family. This federal...

Advice For Using Free Tax Forms by Carl LaFresnaye

There are many different avenues that can be used to obtain free tax forms from the government. There are usually free tax forms that can be found at the local libraries during tax season. There are...

A History of the Income Tax in the U.S. by Garry Gamber

After the United States declared its independence and fought the Revolutionary War, the U.S. Congress relied on excise taxes on alcohol, tobacco and a few other products for revenue to pay off its war...