Finance articles and news

The IRS, armed with more funding and smarter computers, is planning to amp up its audits of individual taxpayers this year. Despite the fact that if you have high income you are less likely to simply fall below the radar, having a lot of money alone is surely not the only factor that can trigger an audit. In actuality, last year, only about 6.4 percent of the country’s 440,000 highest-income tax payers were audited.

What this means is that there are precautionary measures you can take, or things you can avoid to reduce your chances of getting audited. In a lot of cases, the less attention you draw to yourself, the less likely you are to get audited.

A lot of things you can do are no-brainers. For example, be certain that all of the Forms 1099 that you have received for interest, dividend, and other investment receipts are reflected somewhere on your tax return. Usually this will be done on Schedule B. Internal Revenue Service computers are more efficient now and have gotten better at matching the copy of the 1099 that got sent to them with your return, and noticing if you left anything out on your return. If it notices any type of omission, the result may be a CP-2000 letter from the IRS giving you thirty days to explain the mismatch, or even the start of an Internal Revenue Service audit.

If you are planning on claiming large deductions for gifts to charity, make sure you meet the “paperwork requirements.” These include having a receipt or some other type of proof on paper for every donation no matter how small, and for each donation of $250 or more, you will need to have written acknowledgment from every charity.

Bear in mind that in the case of these larger donations a canceled check will not be enough. You must have an actual letter from the charity before you can file for the return. The IRS is asking for this paperwork in “correspondence audits” and then denying deductions that otherwise may have been valid because of untimely or missing paperwork.

Mallory Megan works for Rapid Recovery Solution and writes articles about New York collection agencies.

Each year, the IRS allows you to claim charitable donations as a reduction in your tax liability. If you are attempting to lower the amount you owe to the Internal Revenue Service (IRS), you might consider claiming a charitable donation. When you donate to a charitable cause, you not only help yourself in terms of the taxes you owe, but you also help contribute to your community and positively to society. There are several amazing charities to choose from. Here are some helpful things to know before attempting to claim such deductions.

First, make sure that your contribution qualifies. Remember that you must donate property or cash to a qualifying organization. Check with the organization and make sure that your donation will qualify. Only those who itemize their deductions are allowed to take advantage of charitable contributions on their taxes.

Next, make sure that you keep proper documentation of the donation for the IRS. For cash contributions you must have supporting documentation. Likewise, you will be required to assess the fair market value for any property you donate. For non-cash contributions totally more than $500, IRS Form 8283 must be completed. A written appraisal must accompany any non-cash contribution more than $5,000.

If you contribute cash in a value less than $250, make certain that you have a bank or credit card statement or copy of your cancelled check. For more than that amount, you will need written acknowledgement from the charity with the amount contributed clearly on the receipt or letter. Property donations require records with the charity’s address clearly labeled on them. If the fair market value for your property is more than $500, you will need a statement disclosing how you obtained the property. If more than $5,000 a qualified appraiser will need to write a statement for you.

If you have any questions about what precise documentation you need, consult your accountant or tax advisor. There is also information available from the IRS. Donating to a charity is a great way to help others. Look for a charity whose mission closely matches your own desire to help. There may also be special tax qualifications for donations made to schools or for charities that help the working poor.

Guardian Tax Resolutions will help you get IRS tax relief today from professionals that are experienced and qualified with significant expertise in IRS tax problems.