|
 NOTE:
Ask
FREE Tax Questions below.
It's
That Time of Year Again
Illustrations
by Eldon Dotty & Art Glasier
The dreaded IRS is knocking on your door
wanting your return and as much money as it can get.
Are you doing your return yourself? Is your return
completed correctly with all the i's dotted and t's crossed?
Do you have the potential to be flagged for an audit?
We asked our favorite "number chicks," I mean
CPA's, from Bloom & Associates to share some insights
with us.
armada Magazine: What is one
the most common reasons that a return is flagged for an
audit?
Bloom & Associates: Whether you e-file or
send in a paper return, your information goes into a
computer. The computer can't reason why you reported
things certain ways. It just knows how things should
be done. So at this point it is you against the
machine and the game is called "Match Up All the
Numbers." So the most important and simplest
thing you can do to avoid an audit is to make sure your
return includes everything that third-parties have reported
to the IRS about you. The machine doesn't care that
your 1099-G for unemployment was mistakenly thrown away
after having beer spilled on it, it just knows you need to
report to verify:
-
W-2's
from employers agree to your reported W-2 wages.
-
Income
from 1099 forms matches the proper income items on
your return.
-
Mortgage
interest statements from your lender match the
amount of interest
you deducted as an itemized deduction on Schedule
A.
-
Interest
and dividend reported from banks and brokerages
match the actual
interest and dividends you received compared to
what you entered on your
return.
-
If
you itemized in 2003, took a deduction for state
taxes on Schedule A, and received a refund, make
sure you report the refund in 2004.
-
And
if you got a 1099-G for unemployment compensation,
report it even if it was the victim of a party
casualty.
|
armada
Magazine: We've heard that the
chances of being audited are less if you file an extension
and then file your return sometime after April 15th.
B&A: That's an urban legend these days.
With technology, it doesn't matter when you file your
return; you're in the same frying pan as everyone else.
 armada Magazine: So if I file
on time and make sure I win the "Match Up All the
Numbers" game, then I'm fairly safe on the audit side?
B&A: Not necessarily. That's when the game
changes from "Match Up All the Numbers" to
"Are the Numbers Reasonable." That's when it
gets tricky. For example, someone who is self-employed
and works out of their home has several reasonableness tests
they have to pass. However, the IRS will never share
with us exactly what the magic point of reasonableness is on
these tests.
-
Is
the portion of their home that they are calling
their office reasonable from a square footage
standpoint? And if not, it better be
supportable.
-
Is
their car mileage deduction reasonable? I'm
sure there are people out there that may drive
their car more than 80% for business purposes, but
if so, they better be able to support it.
-
Is
their travel and entertainment reasonable?
We don't even need to talk about the trips to
Hawaii or the cruises to the Bahamas. If
you're deducting those, you better have a good
story and a good accountant.
|
armada
Magazine: How can people make
sure that they've captured all of the deductions they are
entitled to?
B&A: The best way to ensure you're catching
all deductions is to make sure you have selected the correct
forms and schedules to fill out, and that you have a decent
understanding of the tax law. Even if you are using
tax preparation software you may not be using all the
correct schedules. Besides making sure you use the correct
schedules, are you missing schedules that may entitle you to
additional credits? The software is only as good as
the information put into it, and only as knowledgeable as
the person using it. If you have more than just a
simple return, you should seek professional advice.
We've noticed that several of our clients who prepared their
own returns last year missed some important deductions by
not having an understanding of everything they could deduct.
Check back frequently for future articles.
Would
you like to ask a specific question for Bloom &
Associates?
Fill out the form below and
click on "Submit" and we will get back with you.
|
