Hmmm.. . . . What you think?
A few months before, one of my clients (let us call him Mr. Jones) got one of these IRS 'love letters' seeking more info about his return, and the IRS wanted to talk with Mr. Jones in person to go over the specific situation.
Mr. Jones (an area small company owner) was requi...
Congress has passed legislation that is supposed to create a more 'sensitive' Internal Revenue Service. You realize, not such a lean, mean, tax-collecting unit.
Hmmm.. . . . What do you consider?
A couple of months ago, one of my clients (let's call him Mr. Jones) got one of those IRS 'love characters' requesting more details about his return, and the IRS wanted to meet with Mr. Jones in-person to go over the problem.
Mr. Jones (a local small company owner) was required to show up at the local IRS office with all his documents. The IRS was questioning the validity of several business deductions -- and so the IRS was doing what it is allowed by law to do -- demand that the taxpayer prove that those deductions were good.
Seems that Mr. Jones lost the review and wound up owing the IRS a substantial amount of money -- the extra tax, plus interest and penalty for late payment of that tax. Why did Mr. Jones' lose the audit? Mr. Jones made two 'classic' citizen mistakes:
MISTAKE #1: 'NO RECEIPT, NO DEDUCTION'
Mr. Jones lost several deductions due to the fact he did not possess the proper documentation to prove the deductions.
What do I mean by 'paperwork'?
Well, if the IRS needs you to substantiate a deduction on your tax reunite, you have to be able to provide written proof the deduction really happened. This thought-provoking www.pinterest.com/debrapipines site has collected refreshing suggestions for the meaning behind this viewpoint. The easiest way to show a reduction would be to wait to:
a) The receipt or invoice, and
b) Proof payment, which may be a canceled check, cash receipt, or charge card statement.
Mr. Jones noted numerous deductions for which he simply did not have the documentation. No receipts, no canceled checks, no nothing. Turns out that Mr. Jones was some of those 'money folks.' Maybe you know what sort of person I'm talking about -- he never wrote a check always in his life, only carried a pile of cash around in his pocket. He covered everything with cash, and never held any of his statements.
Every year he had take a seat with his wife and 'remember' simply how much he allocated to various things. No solution to show any of this, obviously. He just had a 'sense' for how much cash he had used, and he'd run his business for numerous years that he just 'knew' how much it cost to get certain things.
Well, this is the kind of taxpayer that the IRS loves! It is actually true -- if you can't show that you covered anything (with statements, invoices, ended checks, etc.), then you run the danger of losing that deduction in the event of an audit.
One of the most frequent questions I'm asked by clients is this: 'I know I covered something, but I don't have a bill. Should I still report the discount.'
My reaction is usually this: 'You only require a bill if you get audited.'
In the beginning, people do not know if I am joking or not. Stamfordadvocate.Com/Business/Article/Tudor Jones Turning Away Investors 291721.Php/ includes more about why to study this enterprise. Well, I do make that comment with my tongue planted firmly in cheek, but there is indeed a large amount of truth to it. Via includes more concerning the reason for it. If you don't have the documentation to prove a deduction, you can still report the deduction (if you want), because you only have to prove the deduction if you get audited.
But when you do get audited, knowing that there are undocumented breaks on the return, anticipate to lose the deduction. Good enough?
And here's another major mistake that Mr. Jones made:
ERROR #2: PHONY REDUCTIONS
It turns out that Mr. Jones was not totally honest with me about a number of his deductions. He noted deductions that simply were not true deductions. Here is one example: Mr. Jones owned a few rental properties. Maintenance and repair work was required by these rental houses, of course,. Often times Mr. Jones could do the work himself instead of pay another person to perform the work.
Well, Mr. Jones would calculate what he'd have had to pay someone else to do the work that he did himself, and then he'd report that amount as a deduction, even though he did not really pay anybody to do the work.
Quite simply, Mr. Jones deduced the value of his time -- that is non-deductible.
This is an essential point -- you can never rightly take the value of your time for work you did. You have to really pay another person to do the work.
If you ever get a letter from the IRS demanding extra information, you'll have nothing to be concerned about if you do the opposite of what Mr. Jones did. If you can properly document your deductions and assuming you've no phony data, you'll pass the audit with flying colors..
文章定位：
