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New Tax Laws Difficult To Navigate

January 23rd

The IRS audits little more than 1% of all personal tax returns annually. The agency doesn’t have enough personnel and resources to examine each and every tax return filed during a year. So the odds are pretty low that your return will be picked for review. But, with many new 2013 tax laws in effect and some still yet to be voted in Congress, the chances of making a filing mistake increases the chance of an audit.

Don’t Put Your Return At Risk

Facing pressure from a Congress dealing with a growing federal deficit, the IRS has made it clear it takes the enforcement of tax audit seriously. But the rich aren’t the only targets. Recent tax law changes, particularly when it comes to confusing tax breaks such as the first-time homebuyer credit, always prompt closer looks at returns. And if you’re a small-business person, either as a partnership or a Schedule C filer reporting self-employment income, you’ll want to take extra care with your deductions. And those with lower incomes eligible for the complicated earned income tax credit also face added scrutiny. Nearly 30 percent of audited returns had this claimed as a tax credit.

A few of the common mistakes made are failing to report all income or a mis-match of information from a W2. If your charitable deductions are disproportionately large compared with your income, it raises a red flag. Also, taking higher than average deductions or not having proper receipts may pull your return for review. And, if you sold stock you will need the exact dates of sale and prices. There’s no sure way to avoid an IRS audit, but by being aware of red flags, your chances of drawing unwanted attention from the IRS are decreased. In the event of an audit, a tax debt attorney will work on your behalf with the IRS towards a positive resolution.

 
 
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