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IRS Audit – How far back can you be audited?

IRS Audit Representation

Have you ever wondered how long you should keep tax return documents, just in case the IRS decides to audit it? Even if you do your best with your taxes, taxes are horribly complex.  It is good to know laws that set time limits on IRS audits.

Under the Internal Revenue Code, Section 6501 provides the statute of limitations on IRS audit. It varies depending upon the circumstances of the tax return.  Generally, IRS will not go back more than 3 years unless there is something very wrong with the tax return that was filed.

The statute of limitations starts on the original due date of the tax return.  If the tax return was filed prior to the due date it doesn’t matter, the statute of limitations starts on April 15th of the year that the tax return was due.  It’s important to note that filing a tax return on extension has the downside of also extending the time your return is subject to an audit.  So, if you filed your 2013 tax return on April 15, 2014then the IRS would have time until April 15, 2017, to audit it.  However, if you had requested an automatic extension and filed tax return on Oct 15, 2014 then the IRS still has time until Oct. 15, 2017, to audit your return and assess any additional tax and penalties due.

Below are the three different time frames and descriptions of when each applies for the IRS to audit your tax return.

3 Year Period: This is the standard amount of time that the IRS has to legally audit most tax returns.  This is the time period that applies if you do not fall into any of the two categories listed below.

6 Year Period: If the income on the tax return was understated income by 25% or more the statute of limitations to audit the return can be extended by another 3 years.  It is really worth noting that the IRS doesn’t consider any amount as omitted from gross income if you disclose it in the tax return, or in a statement attached to it, and you do it in a manner that’s adequate for the IRS to appraise the nature and amount of the item.  So, in case you used an estimated cost basis to reduce the capital gains income on the sale of property.  However, you disclosed this and the possible lower cost basis on a written statement, the IRS would have only three years to audit that tax return.

Unlimited Time Period: If the tax return was filed with the purpose to commit fraud then the statute of limitations may be prolonged to all the time.  There may be a great line between fraud and negligence and this best applies to tax fraud.  The IRS ought to show fraud in those forms of cases and generally will most effective do that if a variety of money is concerned or it is an excessive profile tax case.

How far back can you be audited

IRS Audit Group attorneys are extremely passionate about helping people, and at IAG we are dedicated to resolving your IRS tax issues.  Our tax attorneys take pride in being accessible, efficient, and responsive.

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Tax Audits: Understanding IRS and State Tax Audits

When you get a notice from IRS for State Audit, it evokes a mix of responses and you may get frightened.  If this is the first sales tax audit your business has experienced, your first reaction may be to panic, and wonder why you were chosen.  If you have previous tax audit experience, you may be a bit more relaxed, but the inconvenience and disruption caused by tax audit may have you looking for ways to delay the audit until a better time.

Regardless of your reaction, there are important steps to be taken while preparing for sales tax audit.  There are also serious things for you to avoid as you deal with the tax auditor.  When it comes to sales tax audit preparation, and audit management it is different.  It depends on each business and each state audit and these suggestions need to be evaluated in light of your specific situation and the types of transactions your business conducts.

States Audit

State sales tax audits are conducted for a number of reasons.  First and foremost, the states will tell you that the audit is to make sure that the state sales tax laws are being followed by the businesses.  In reality, the tax audit is a significant and effective way to increase tax collections and state revenue.  Although auditors are not generally evaluated or compensated on the number of audit collections they generate, the unspoken expectation is that they will collect enough unpaid tax to cover a multiple of their salary.  Tax Audits improve state revenue straight through the valuations of tax, interest, and penalties paid by the taxpayer. It will also result in future increased tax payments of the business once the errors have been identified and corrected.

In addition to generating immediate tax revenue, sales tax audits also provide productive and valuable information for future audit leads.  As auditor gathers more information on untaxed purchased made by from out-of-state companies, this information is further evaluated.  This often leads to link inquiry from being sent to these out-of-state businesses that may be audited if it can be proved that they have the connection with the state

Finally, audits provide a very clear picture as to what types of transactions are occurring in the marketplace.  States laws and regulations delay significantly from realities of the marketplace.  As auditors see new sales transactions and new types of products/services being sold that do not neatly fit into the existing tax framework, they often give this data to the tax policy folks.  This will further result in the change of regulations to better define the tax treatment of the transactions.

To sum it up to states audit in order to:

  • Collect revenue for the state
  • Make sure businesses within the state are collecting sales tax (and in the right amounts)
  • Generate future revenue for the state as businesses become compliant
  • Find out-of-state trades that may possibly have connection in-state
  • Find out what types of transactions are occurring in the marketplace in order to make new tax laws.

Despite of all these things, the first step you need to do is to avail the service of qualified and experienced auditors.  IRS – Audit- Group is a team of Tax Professionals, CPA’s and Enrolled Agents who major in in Tax Audit Representation & Resolution.  Besides the IRS, agencies such as the California State Tax Audit and the Board of Equalization can also inquire about the taxes you filed.  Complete the Audit process with ease and stress-free with IRS AUDIT GROUP.

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Getting Ready for Tax Season

Below are steps taxpayers can take now to ensure smooth processing of their 2017 tax return and avoid a delay in getting their refund next year. The Internal Revenue Service (IRS) advises taxpayers to get ready for the upcoming tax filing season by gathering documents, renewing expiring ITINs, and get prepared for refunds.

 

For additional help, hire a tax expert, like our team at IRS Audit Group to guide you through the process. It is better to get a head start to prevent missteps later. As we enter the tax season, contact us to book an appointment and we can review everything together so you don’t deal with another year of tax stresses on your own.

 

Start by gathering documents. File a complete and accurate tax return by making sure the IRS has all the documents before filing your return, including 2016. This includes Forms W-2 from employers, Forms 1099 from banks and other payers, and Forms 1095-A from the Marketplace for those claiming the Premium Tax Credit. Doing so will help avoid refund delays and the need to file an amended return later. Confirm that each employer, bank or other payer has a current mailing address.

 

Renew Expiring ITINs before the end of the year. Doing so promptly will avoid a refund delay and possible loss of key tax benefits. Any ITIN not used on a tax return in the past three years will expire on Dec. 31, 2017. Similarly, any ITIN with middle digits 70, 71, 72 or 80 will also expire at the end of the year. Anyone with an expiring ITIN who plans to file a return in 2018 will need to renew it using Form W-7.

 

Refunds Held for Those Claiming EITC or ACTC Until Mid-Feb: By law, the IRS cannot issue refunds for people claiming the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law requires the IRS to hold the entire refund — even the portion not associated with EITC or ACTC.

 

The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or debit cards starting on Feb. 27, 2018, if direct deposit was used and there are no other issues with the tax return.

 

For a faster refund you can choose to e-file or use direct deposit. Electronically filing a tax return is the most accurate way to prepare and file. Errors delay refunds and the easiest way to avoid them is to e-file. Nearly 90 percent of all returns are electronically filed. There are several e-file options:

 

Combining direct deposit with electronic filing is the fastest way for a taxpayer to get their refund. With direct deposit, a refund goes directly into a taxpayer’s bank account. There’s no reason to worry about a lost, stolen or undeliverable refund check.

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How to Settle Your IRS Tax Debt

Do you have tax debt, but don’t know what to do about it? You definitely shouldn’t let the letters and notices pile up – especially if they’re coming from collection agencies who are after money owed to the Internal Revenue Service. You also don’t have to face the IRS alone. When it comes to settling tax debt, it helps to have someone by your side.

 

According to Publication 594 of the IRS, “The collection process is a series of actions that the IRS can take to collect the taxes you owe if you don’t voluntarily pay them. The collection process will begin if you don’t make your required payments in full and on time, after receiving your bill.”

 

Sometimes it’s not as easy as paying off what you owe. In most cases, you’ll need the help of a tax professional to negotiate with the IRS. Our enrolled agents have seen countless cases, varying in amount owed and levels of difficulty, but each time they have been successful in relieving taxpayers of monetary burdens.

 

Learn about the several ways to pay or reduce costs and let us know how we can help:

  • Installment Agreement/Payment Plan – Similar to a monthly credit card payment. The IRS payment plan would allow you to pay off your unpaid back taxes in installments instead of all at once.
  • Offer in Compromise – Settle your tax debts for less than what you owe. This could save you thousands of dollars in taxes, penalties and interest if you are given the opportunity to pay that small amount as a full and final payment.
  • Not Currently Collectible – This means that a taxpayer has no ability to pay their debts. The IRS can declares them “currently not collectible” only after the receiving evidence that there is no ability to pay.
  • Bankruptcy – You should consider bankruptcy only if you meet the requirements for discharging your taxes. Income tax debts may be eligible for discharge under Chapter 7 or Chapter 13 of the Bankruptcy Code.
  • Fresh Start Initiative – Under the new and more flexible rules issued by the IRS, taxpayers do not have to disclose extensive financial details to the IRS to judge their paying ability. This initiative offers several advantages.

 

If you are familiar with our services then you know IRS Audit Group can help you with any of the options listed above. With our advice, you’ll be one step closer to achieving financial stability and getting back on your feet. We are experts in tax debt resolution and are ready to work on your case. Call us today to get started!

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Beware of IRS Scammers

As always, scammers who impersonate Internal Revenue Service officers are still a threat to taxpayers. They have been tricking innocent people and robbing them of money and peace of mind. We’ve compiled a list to help you determine real IRS representatives from fake ones so you can protect yourself:

 

  • The IRS is NOT aggressive in their approach. Scammers are typically rude over the phone and easily agitated.
  • The IRS does NOT initiate contact with taxpayers by email, text messages or social media channels.
  • The IRS does NOT mention law enforcement efforts such as: local police or immigration officers.
  • The IRS mails notification letters to taxpayers if they owe any taxes and do NOT request immediate payment via wire transfers. (Payments must only be sent to United States Treasury)
  • Taxpayers can request credentials for the representative to prove they are there for an IRS visit.

 

Following these tips will keep you safe, but if you find yourself in a sticky situation you can always give IRS Audit Group a call. We’ll help you avoid this in the future and verify that your information is in good hands. Also, share this blog so your family and friends can steer clear of scammers as well.

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Upcoming Tax Deadline

If you’ve requested a six-month extension to submit your taxes then your deadline is coming up quick! October 16, 2017 is the last day to file your individual or corporation return. This includes the 1040, 1040A and 1040EZ or 1120 tax forms. Beware of penalties for late payments or filing.

Don’t let this extra time go to waste. Be sure that you file your return immediately and see if you qualify for common credits and deductions. Low and moderate income families may be eligible for special tax benefits as well.

According to the IRS, you could also receive credit if you’ve paid college tuition or fees in the last year. Same goes for those that have made their homes energy efficient.

E-filing will reveal guides and tips to help you complete your return, but you can also call us for a one-on-one consultation with a tax professional. If you’ve missed important deadlines in the past or fear you won’t get the paperwork done in time for the upcoming deadline please give IRS Audit Group a call to learn how we can help resolve your tax issues ASAP.

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Business Tax Deadline is Almost Here!

If you got an extension on your taxes earlier this year, the time has now come to submit your returns. The business tax deadline is approaching on September 15 and you don’t want to miss it!

If you want to be sure everything is done quickly and accurately, then contact us today! IRS Audit Group is ready to help and we are just a call or click away. Don’t waste another second wondering how you will complete all the paperwork in time – we got you covered.

For those of you that have yet to file, remember that the Personal Tax Extension Deadline is coming up as well on October 15.

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Tax Limits: Be Cautious Of Advertisements

Year-end tax planning is approaching, which means thousands of ads are going to flood your computer while browsing the web with suggestions on what to do in order to help you prepare.

 

The fact of the matter is that somehow and somewhere; you’re going to collect information and put it to use. However, we want to make sure you’re choosing the right sources to consume information from.

 

Being a business owner, you understand that taxes are a mandatory and vital component of operating a business. One small mistake can cost you a nice chunk of money. And proper preparation can save you tons of money as well.

 

Your tax money is used for mostly government functions. But, that’s beside the point. The point is that you need to be more involved and educated in order to make sure you consume the right information and make the right decisions when preparing for tax season. The good thing is that this can be accomplished by becoming active in credible organizations such as; The National Small Business Association, or the local state and National Chamber of Commerce.

 

When it comes to consuming information, you only need to trust reliable sources like the ones mentioned above. Just because a person is a; friend, neighbor, or relative doesn’t mean they’re educated in taxes and finances. Sorry to burst your bubble. They could be consuming the wrong information as well, since there’s so much false information circulating around in society anyway.

 

So, if you can’t rely on people close to you such as relatives or friends, who do you go to? The simple answer is to hire a CPA. Although, there are definitely untrustworthy and inexperienced CPA’s, this is your best bet. But, figuring out who to trust all comes down to your best judgement.

 

Owning a business and dealing with highly complex tax returns will require education and experience in an accountant. We understand the importance of hiring an advisor or accountant to handle your financial affairs. However, the dilemma that most business owners face is choosing whether or not to hire an individual accountant, or a firm.

 

This decision will all come down to how much fire power will be needed for the job. For example, paying $400/hr to a tax analyst for a simple 1040EZ is wasteful. That’s a simple job that shouldn’t require you to pay an arm and a leg. Therefore, it all comes down to how complex your situation is.

 

Another good rule of thumb is making sure your tax advisors main focus is tax pro. We’ve have seen many individuals try to have a tax auditor prepare their taxes, and it just doesn’t work out the way they want it to all the time. This is due to many advisors having different primary practices. Even if you’re paying top dollar, that doesn’t mean you’re going to get the best results if their primary practice is different than what you require.

 

Besides being wary of the advisor you hire, be careful of ads on the radio and TV as well. There are many companies who spend tons of money on advertising, using the money they made from previous clients they charged. Simply put, you want to hire people with experience and not because they engaged in a marketing blitz to make themselves seem credible.

 

Your chances of getting positive results this tax year will drastically increase when hiring the appropriate person, and being cautious of who and where you consume information from. Consider all of these options, and you will have much success this filing season.

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Haven’t Filed Taxes For Years? The IRS May File On Your Behalf.

Have you ever wondered what would happen if you didn’t file your tax return? Well … You basically lose your refund (if you pass the three year tax deadline date) which for some people can be a significant loss. Also, you put yourself at risk of having the Internal Revenue Service (IRS) file for you.

Don’t wait on the IRS to file your taxes on your behalf. Let IRS Audit Group file your taxes in full compliance with the IRS. We will collect all the information from tax authorities, review it with you and file your tax return.

According to the IRS, substitute for return (SFR) and delinquent return procedures were developed to deal with taxpayers who do not file required tax returns. They use this to assess the correct tax liability by either:

  1. Securing a valid voluntary tax return from the taxpayer (delinquent return), or
  2. If securing a return is not possible, computing tax, interest, and penalties based upon information submitted by payers, or based on other available information (SFR).

If the IRS files a return, it will be based on the information they have available through existing records and it is usually done automatically. The downfall to this is that whether you were married filing jointly, had dependents you could claim for that year or whether you had any deductions are not taken into consideration. You’d sacrifice any of the credits that could lower your taxes and may end up owing substantially more taxes based on the SFR than if you filed your own tax return.

This triggers the snowball effect: If you fail to pay the taxes the IRS has assessed against you, the IRS will begin collection proceedings to collect the taxes. Which could include issuing levies against your bank account or wages and filing liens against your property.

Don’t face the risk of increasing your tax liability – contact IRS Audit Group today to file your returns or for help on other tax issues. You still have options in cases like this and our team of tax professionals would be happy to guide you through them!

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Renee M. Schoenberg: Tax-exemption status can be taxing

If you haven’t heard of Renee M. Schoenberg, you will now. Her work is all over the map in multiple countries! Renee is a DLA Piper Senior Counsel who has structured and helped so many nonprofits across 5 continents. In fact, she has helped so many that she can’t even name some of the countries that they’re located in right off the top of her head.

 

Some of these organizations work in an array of fields which include; fighting global hunger, offering less fortunate D.C. residents affordable legal services, sparking interest in science experiments for Chicago youth, and much more!

 

What makes these projects impressive isn’t just the projects themselves, but the complexity and new problems that arise during the projects. All of the causes that Schoenberg supports brings about new technical challenges when applying for tax-exempt status from the Internal Revenue Service (IRS).

 

This is the reason for Renee becoming interested in doing work for the public good in the first place. She enjoys the challenges that arises by overcoming them, and the emotional response that comes with overcoming these challenges comes second.

 

Renee has earned many achievements from doing this as well. She was one of the 5 recipients recognized for her “outstanding commitment” to volunteer legal services.

 

“To me, it’s the pinnacle of recognition, like a lifetime achievement award,” according to Renee.
It’s not a surprise that Schoenberg is someone who is dedicated to perfecting her craft and making a difference. Many wonder how Renee first started getting into the act of her pro bono work. Well, Renee first started helping nonprofits as a spinoff from her trust and estates work. She knew of a family who wanted to underwrite a psychiatrist’s fees so that people of lower income can afford it.

 

Due to fear that the psychiatrist was trying to turn his organization into a tax-exempt organization, Renee’s application was rejected by the IRS. However, the second application was approved once she showed how the psychiatrist was charging less than market value price for low-income customers. This sparked her interest even more in learning how to structure many different nonprofit organizations.
Renee went on to learn that the key to success when applying for tax-exemption is “Knowing what the hot button issues are going to be and diffusing them in the application.” She gives credit to thorough research in order to accomplish this.

 

Anne Geraghty Helms, who is DLA Piper’s U.S. Pro Bono Programs director and counsel, refers to Schoenberg as the nonprofit guru of the office. She consistently supervises and mentors young attorneys interested in her field, while helping the firms thousands of attorneys located in over 30 countries.

 

It’s clear that Renee is serving a good cause in the world. No one has ever heard of Renee “declining” someone who may be in dire need of support. The fact of the matter is that they’re not too many Renee Schoenberg’s out here, that’s for sure.

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