Auerbach Law Group, P.C.Auerbach Law Group, P.C.2024-03-01T21:15:58Zhttps://www.auerbachlaw.com/feed/atom/WordPress/wp-content/uploads/sites/1402161/2020/11/cropped-directory-image-32x32.jpgOn Behalf of Auerbach Law Group, P.C.https://www.auerbachlaw.com/?p=494032024-02-29T21:16:06Z2024-03-01T21:15:58ZUnderstanding tax audits
An IRS tax audit is an examination conducted by authorities to ensure taxpayers are accurately reporting their income and deductions. While audits serve to maintain fairness in the tax system, taxpayers may question the necessity of facing an audit.
Reasons for doubt
Several factors may lead you to believe that a tax audit is not justified. For instance, if you consistently file accurate and honest tax returns, you may question why you are being subjected to an audit. Additionally, discrepancies in the audit process, such as incorrect information or procedural errors, can raise doubts about its validity.
Gathering evidence
To prove that a tax audit is unjustified, you must gather relevant evidence to support your claim. This includes documentation of all income, expenses and deductions claimed on your tax return. Providing thorough records can demonstrate compliance with tax laws and refute any allegations of wrongdoing.
Requesting clarification
If you believe that the reasons provided for the audit are unclear or insufficient, you may request clarification from the IRS. Clear communication can help resolve misunderstandings and address any concerns regarding the audit process.
While tax audits are a routine part of maintaining tax compliance, you have the right to question the justification behind them. By fully understanding your rights, you can ensure fair treatment for yourself under the law.]]>On Behalf of Auerbach Law Group, P.C.https://www.auerbachlaw.com/?p=494012024-02-28T01:55:25Z2024-03-01T01:54:33ZThree-year general limit
Generally, the IRS can audit your tax returns for up to three years after the filing date. However, if the IRS suspects you made a substantial error, they may extend this period to six years.
This is the statute of limitations for assessment. It is important to note that the statute of limitations applies to the date you filed your return and not the date you made payments on your account.
Further extensions and procedures
If the IRS believes you have committed fraud or failed to file a tax return, there is no statute of limitations for assessment. In these cases, the IRS can audit you at any time.
During an audit, the IRS will review your financial records and may ask for additional information to verify the accuracy of your tax return. If the IRS finds discrepancies, they may adjust your tax return and assess additional taxes, interest and penalties.
The bottom line is that the IRS has a pretty wide range of how far they can go back for audits. The idea is to ensure taxpayers are complying with tax laws and reporting their income accurately.]]>On Behalf of Auerbach Law Group, P.C.https://www.auerbachlaw.com/?p=493992024-02-22T18:31:04Z2024-02-22T18:31:04ZBe honest and transparent
Transparency is key when dealing with the IRS. Be honest about your financial situation and provide accurate information regarding your income, expenses and assets. Concealing or misrepresenting facts can lead to further complications.
Ask for clarifications
If you are unsure about any aspects of the debt or the collection process, do not hesitate to ask the agent for clarification. Understanding your rights and responsibilities can help you make informed decisions and potentially negotiate a manageable payment plan.
Provide documentation
Supporting your claims with documentation can strengthen your case and demonstrate your willingness to cooperate. Pay stubs, bank statements or tax returns can expedite the resolution process.
Propose a payment plan
If you are unable to pay the full amount owed upfront, proposing a payment plan may be a viable option. Be prepared to outline how much you can afford to pay each month and provide reasoning behind your proposed terms.
Follow up as needed
Stay proactive throughout the process by following up with the IRS as needed. Whether it is to provide additional information or inquire about the status of your case, staying engaged can help ensure that you address your concerns in a timely manner.
The law requires the IRS to use private agencies when collecting outstanding tax debts. While these agencies are separate from the IRS, they conduct business on behalf of the U.S. government. This makes it all the more important to know your rights and options when dealing with an agent.]]>On Behalf of Auerbach Law Group, P.C.https://www.auerbachlaw.com/?p=493972024-02-20T02:20:53Z2024-02-21T02:20:47ZAvoid procrastinating
After a divorce, prioritize your tax matters by consulting a CPA promptly. Early preparation can prevent last-minute stress and potential IRS issues. Gather your documents and share them with your CPA to ensure a smooth process.
Also, if you and your ex shared a tax preparer, find a new CPA for a fresh start. Provide your new CPA with past tax documents and inform them of your marital status change and any relevant details from your divorce judgment.
File with the correct status
If your divorce was pending by December 31, file as "married filing separately" to protect yourself from your ex-partner's tax errors or debts. If your divorce became final before the end of 2023, file as "single" to reflect your new marital status accurately.
Determine child care deductions
Clarify child dependency arrangements in your divorce settlement to avoid conflicts over claiming dependents or child tax credits. Ensure your agreement aligns with IRS regulations regarding custody and financial support.
Secure your finances
Open new individual accounts to separate yourself from any joint financial ties with your ex-partner. This step helps with financial independence and shields you from potential liabilities if your ex encounters financial difficulties.
Update property ownership and division
If one partner retains ownership of the marital home, ensure the other name is off the property title to avoid joint liabilities for taxes or liens. The divorce judgment paperwork should reflect this action.
Distinguish between marital and separate property with the help of your CPA. Take stock of deferred spending accounts, retirement funds and other assets to plan your financial future effectively.
Addressing tax matters post-divorce requires clear communication and careful planning. Establishing financial independence and understanding tax implications are necessary steps toward building a stable future.]]>On Behalf of Auerbach Law Group, P.C.https://www.auerbachlaw.com/?p=493942024-02-17T22:25:52Z2024-02-20T22:24:57ZAvoid procrastinating
After a divorce, prioritize your tax matters by consulting a CPA promptly. Early preparation can prevent last-minute stress and potential IRS issues. Gather your documents and share them with your CPA to ensure a smooth process.
Also, if you and your ex shared a tax preparer, find a new CPA for a fresh start. Provide your new CPA with past tax documents and inform them of your marital status change and any relevant details from your divorce judgment.
File with the correct status
If your divorce was pending by December 31, file as "married filing separately" to protect yourself from your ex-partner's tax errors or debts. If your divorce became final before the end of 2023, file as "single" to reflect your new marital status accurately.
Determine child care deductions
Clarify child dependency arrangements in your divorce settlement to avoid conflicts over claiming dependents or child tax credits. Ensure your agreement aligns with IRS regulations regarding custody and financial support.
Secure your finances
Open new individual accounts to separate yourself from any joint financial ties with your ex-partner. This step helps with financial independence and shields you from potential liabilities if your ex encounters financial difficulties.
Update property ownership and division
If one partner retains ownership of the marital home, ensure the other name is off the property title to avoid joint liabilities for taxes or liens. The divorce judgment paperwork should reflect this action.
Distinguish between marital and separate property with the help of your CPA. Take stock of deferred spending accounts, retirement funds and other assets to plan your financial future effectively.
Addressing tax matters post-divorce requires clear communication and careful planning. Establishing financial independence and understanding tax implications are necessary steps toward building a stable future.]]>On Behalf of Auerbach Law Group, P.C.https://www.auerbachlaw.com/?p=493912024-01-30T20:10:13Z2024-02-01T19:57:35Z1. Incorrect tax classification
The IRS has strict guidelines on contractor classification, and misclassification can lead to unpaid payroll taxes, interest and penalties. To avoid misclassifying workers, small businesses should consult the IRS rules and properly document contractor relationships.
2. Unreported income
Failing to report all taxable income is another common issue for small businesses. You need to report even cash income, as well as bartered services and other non-cash transactions. Thoroughly tracking all income sources and maintaining detailed business records can help small businesses avoid this major red flag.
3. Inadequate documentation
Meticulous record-keeping is key to surviving a small business tax audit. The IRS requires documentation to support all figures on tax returns, including income, deductions, credits and other matters. Lacking proper documentation makes it much easier for the IRS to dispute a tax return. Small business owners should retain organized tax records and only claim deductions they can substantiate.
Avoiding tax litigation is important for small business success. Unfortunately, with the complexity of tax laws and the demands of running a business, mistakes can happen. Investing time upfront into compliance and bookkeeping yields major dividends when tax season rolls around each year. With the right knowledge and preparation, small businesses can steer clear of lawsuits and focus on growth.]]>On Behalf of Auerbach Law Group, P.C.https://www.auerbachlaw.com/?p=493852024-01-18T20:16:24Z2024-01-18T20:16:24Z1. Legal consequences
Attempting to conceal assets from the IRS is a direct violation of tax laws. Businesses engaging in such practices may face legal actions, including hefty fines and penalties. The legal system safeguards the integrity of financial reporting, and any deviation can result in swift and stern consequences.
2. Erosion of trust
Transparency is not just a legal obligation. It is also a cornerstone of trust in business relationships. When it comes to light that a company hides assets, it erodes the trust of stakeholders, including customers, suppliers and investors.
3. Damage to business credit
Concealing assets can negatively impact a business's creditworthiness. Financial institutions and creditors rely on accurate financial information to assess a company's credit risk. If the IRS uncovers hidden assets, it can trigger a chain reaction. That can lead to higher interest rates, limited access to credit and potential business setbacks.
4. Audit scrutiny
Hiding assets raises red flags, inviting closer scrutiny from tax authorities. The IRS has the authority to conduct thorough audits to ensure compliance with tax laws. In FY 2022, the IRS conducted 708,309 tax return audits. Such audits can be time-consuming, disruptive and resource-intensive.
In the event of scrutiny, prompt cooperation with the IRS. Rectifying any discrepancies and demonstrating a commitment to compliance can present more favorable options for mitigating the consequences and steering the business back on a trustworthy course.]]>On Behalf of Auerbach Law Group, P.C.https://www.auerbachlaw.com/?p=493832024-01-08T21:32:59Z2024-01-08T21:32:59Z1. Ignoring the notification
One common mistake individuals make is ignoring the IRS audit notification. This can lead to serious consequences. Ignoring the situation will not make it disappear. In fact, it may worsen the outcome. Responding promptly is necessary to demonstrate cooperation and a willingness to resolve any discrepancies.
2. Altering documents
Some individuals may want to modify or create documents to present a more favorable financial picture. This is a risky move that can result in severe penalties. The IRS is adept at detecting inconsistencies, and attempting to manipulate documents will only exacerbate the situation. It is best to provide accurate and truthful information.
3. Providing incomplete information
Another misstep to avoid is providing incomplete information to the IRS. Failing to provide all relevant documents or omitting important details may raise suspicions and prolong the audit process. Be thorough and transparent in your response, ensuring a timely delivery of all requested information.
4. Avoiding communication
Communication is key during an IRS audit. Avoiding or delaying responses to inquiries can create a negative impression. It is important to maintain open and clear communication with the IRS throughout the audit process. If you need more time to gather information, inform them promptly and request an extension if necessary.
The IRS takes its jobs seriously. In FY 2022, the governmental agency conducted 708,309 tax return audits. Although it can seem stressful, taking a proactive and honest approach is your best ally in navigating these challenging waters.]]>On Behalf of Auerbach Law Group, P.C.https://www.auerbachlaw.com/?p=493812024-01-05T02:15:16Z2024-01-05T02:15:16ZStandard deduction adjustments
To ensure tax brackets do not unfairly push you into a higher rate due to rising costs, the IRS has adjusted the income thresholds for each bracket for 2024. This means more money stays in your pocket before Uncle Sam takes his share. The standard deduction, the amount you can deduct without itemizing expenses, also sees a boost, rising to $14,600 for single filers and $29,200 for married couples filing jointly.
Retirement savings
Contribution limits to retirement accounts like IRAs and 401(k)s are on the rise. You can now put $6,500 in an IRA (if you're under 50) and $23,000 in a 401(k), both up from 2023. The more you put away now, the less financial stress you will deal with in your retirement.
Gift giving
The annual gift tax exclusion, the amount you can give to someone tax-free, increases to $18,000 in 2024. That means spreading some holiday cheer or helping a loved one with a big purchase just got a little easier (and cheaper!).
With the tax code constantly evolving, keeping yourself informed is important. Remember, knowledge is power, and when it comes to taxes, a little extra power can go a long way and can mean a great deal of savings in the long run.]]>On Behalf of Auerbach Law Group, P.C.https://www.auerbachlaw.com/?p=493762023-12-20T17:25:38Z2023-12-22T17:24:57ZPayment plan eligibility
Generally, taxpayers must meet specific limits on their combined tax obligations, interest and penalties to qualify for a payment plan. Those limits vary based on the type of payment plan you choose.
Not only that, but you must file all required tax returns. In addition, taxpayers involved in bankruptcy proceedings are ineligible for payment plans.
Payment plan options
The IRS offers different types of payment plans tailored to suit various financial situations. The most common is the short-term plan, allowing you to pay within 180 days. For longer-term needs, consider a streamlined installment agreement or a regular installment agreement, the latter requiring financial information disclosure.
Keep in mind that interest and penalties continue to accrue on the unpaid balance throughout the duration of the payment plan. Understanding these charges is essential for informed financial planning.
Payment plan modification
If you encounter unexpected financial difficulties, the IRS may modify or temporarily suspend your payment plan. However, it is imperative to communicate with the IRS promptly and proactively to discuss your situation and explore available options.
Nearly 3 million taxpayers set up payment agreements with the IRS in the last couple of years. IRS payment plans offer a lifeline for those grappling with tax debt, providing a structured and manageable approach to settling obligations. Consider your options to settle your outstanding tax debt.]]>