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Beiing audited雖然不是一件很可怕的事情，但對於繁忙的生意人來說確實是一件很“煩心”的事兒。可恰恰做生意的雇主和self-employed 被查的機會是拿工資的人的三倍，原因嘛－－顯而易見。希望我們都在動腦筋省稅的同時，也檢查一下自己的稅表是否有漏洞或“可疑之處”，少犯一些"聰明反被聰明誤"的低級錯誤。當然如果你的賬麵經得起推敲，收據保留完好，也就不怕IRS找上門來。
Most returns chosen for audit are flagged by an IRS computer program known as the Discriminant Function System, or DIF, in tax parlance. The actual scoring formula to determine which tax returns are most likely to be in error is a closely guarded secret. But Nath, a Washington, D.C.-area tax attorney, says it's no mystery that the system is designed to screen for returns that could put more money in the government Treasury.
How do your deductions compare?
Tax experts believe one discriminate function component looks at average deduction amounts. This allows IRS examiners to spot inconsistencies, such as a high mortgage interest deduction and low income. Tax specialists at CCH Inc. examined 2004 return statistics and came up with the following itemized deduction averages. These are for illustrative purposes only. CCH experts note that the IRS takes a dim view of taxpayers who base their claimed deductions on these figures. The numbers can be useful, however, in giving you a general idea as to whether certain deductions on your return might seem out of line.
Allison Einbinder, owner of Dollars & Sense, a tax and accounting firm in Oakland, Calif., recommends that all filers review the differential comparisons. How you stack up against a national standard, she says, will give you an idea of whether the IRS might take a closer look at your return.
So what triggers a discriminant function red flag?
--Higher incomes.
--Income other than basic wages, for example, contract payments.
--Unreported income, such as investment returns.
--Home-based businesses, especially when in addition to salary income, and home-office deductions.
--Noncash charitable deductions.
--Large business meal and entertainment deductions.
--Excessive business, auto usage.
--Losses from an activity that could be viewed as a hobby rather than a business.
--Large casualty losses.
Returns claiming the earned income tax credit, designed as a tax break for lower-income wage earners, also catch IRS eyes. The credit's complexity often results in legitimate mistakes on returns. Some filers, however, have been caught making false claims to increase the payment the credit provides.
Three types of audits
If your return is selected for a closer look, don't panic and don't ignore IRS inquiries. But even tax professionals admit that's easier said than done. "If I get a letter about one my clients," says Einbinder, "I still get that panicky feeling and I'm a professional."
Once you get past those initial inquiry butterflies, determine exactly what the IRS wants and how much time it will take to give them the answers.
If you're in the audit majority, you'll fall into the least-intrusive category, the correspondence audit. This is the easiest process for both the taxpayer and the IRS. In this case, the IRS sends the taxpayer a letter asking for more information about one or two relatively simple items.
"Just because you get a correspondence audit letter, there's no need to panic," says Nath. "In fact, if you get a letter instead of a call, that indicates the IRS views the inquiry as not particularly earth-shattering."
After you provide the requested information, the case is usually closed. If not, you'll get another letter describing the additional taxes to be paid. In these cases, says Einbinder, the IRS is not necessarily putting your return under a lot of scrutiny. "They just want questions answered, some clarity," she says.
If questions about your tax return are more serious, you'll be asked to meet with an examiner at an IRS district office near your home. These agents generally have more training and experience with complex returns. Bring only the documentation needed to answer specific IRS questions, but don't bring or volunteer other data unless you want to open up those records to examination, too.
Finally, there's the field audit. This investigation is done at the taxpayer's home or business and is more wide-ranging. Wealthy taxpayers and businesses are generally the target of a field audit, which gives agents a chance to conduct a "lifestyle" audit.
Here, an IRS agent gets an up-close-and-personal look at a taxpayer's house, neighborhood, car and everything else on hand to see if it meshes with the return's stated income. If a taxpayer has a new Jaguar parked in the garage of a six-bedroom house and reports income of $40,000 a year, he likely will have some explaining to do.
When you get a notice of any type of audit, respond immediately. After you've acknowledged the audit notification, you usually can get a postponement if you need time to gather records. And it's never too late -- even after the audit begins -- to get professional help, such as a tax attorney, certified public accountant or enrolled agent.
"You have rights to contest audits," Nath says, "at every level of the process."
Regardless of what kind of audit you might face, the key is to be prepared.
(from: Freelance writer Kay Bell writes Bankrate's tax stories from her home in Austin, Texas, and blogs on tax topics at Don't Mess with Taxes)
Most returns chosen for audit are flagged by an IRS computer program known as the Discriminant Function System, or DIF, in tax parlance. The actual scoring formula to determine which tax returns are most likely to be in error is a closely guarded secret. But Nath, a Washington, D.C.-area tax attorney, says it's no mystery that the system is designed to screen for returns that could put more money in the government Treasury.
How do your deductions compare?
Tax experts believe one discriminate function component looks at average deduction amounts. This allows IRS examiners to spot inconsistencies, such as a high mortgage interest deduction and low income. Tax specialists at CCH Inc. examined 2004 return statistics and came up with the following itemized deduction averages. These are for illustrative purposes only. CCH experts note that the IRS takes a dim view of taxpayers who base their claimed deductions on these figures. The numbers can be useful, however, in giving you a general idea as to whether certain deductions on your return might seem out of line.
Allison Einbinder, owner of Dollars & Sense, a tax and accounting firm in Oakland, Calif., recommends that all filers review the differential comparisons. How you stack up against a national standard, she says, will give you an idea of whether the IRS might take a closer look at your return.
So what triggers a discriminant function red flag?
--Higher incomes.
--Income other than basic wages, for example, contract payments.
--Unreported income, such as investment returns.
--Home-based businesses, especially when in addition to salary income, and home-office deductions.
--Noncash charitable deductions.
--Large business meal and entertainment deductions.
--Excessive business, auto usage.
--Losses from an activity that could be viewed as a hobby rather than a business.
--Large casualty losses.
Returns claiming the earned income tax credit, designed as a tax break for lower-income wage earners, also catch IRS eyes. The credit's complexity often results in legitimate mistakes on returns. Some filers, however, have been caught making false claims to increase the payment the credit provides.
Three types of audits
If your return is selected for a closer look, don't panic and don't ignore IRS inquiries. But even tax professionals admit that's easier said than done. "If I get a letter about one my clients," says Einbinder, "I still get that panicky feeling and I'm a professional."
Once you get past those initial inquiry butterflies, determine exactly what the IRS wants and how much time it will take to give them the answers.
If you're in the audit majority, you'll fall into the least-intrusive category, the correspondence audit. This is the easiest process for both the taxpayer and the IRS. In this case, the IRS sends the taxpayer a letter asking for more information about one or two relatively simple items.
"Just because you get a correspondence audit letter, there's no need to panic," says Nath. "In fact, if you get a letter instead of a call, that indicates the IRS views the inquiry as not particularly earth-shattering."
After you provide the requested information, the case is usually closed. If not, you'll get another letter describing the additional taxes to be paid. In these cases, says Einbinder, the IRS is not necessarily putting your return under a lot of scrutiny. "They just want questions answered, some clarity," she says.
If questions about your tax return are more serious, you'll be asked to meet with an examiner at an IRS district office near your home. These agents generally have more training and experience with complex returns. Bring only the documentation needed to answer specific IRS questions, but don't bring or volunteer other data unless you want to open up those records to examination, too.
Finally, there's the field audit. This investigation is done at the taxpayer's home or business and is more wide-ranging. Wealthy taxpayers and businesses are generally the target of a field audit, which gives agents a chance to conduct a "lifestyle" audit.
Here, an IRS agent gets an up-close-and-personal look at a taxpayer's house, neighborhood, car and everything else on hand to see if it meshes with the return's stated income. If a taxpayer has a new Jaguar parked in the garage of a six-bedroom house and reports income of $40,000 a year, he likely will have some explaining to do.
When you get a notice of any type of audit, respond immediately. After you've acknowledged the audit notification, you usually can get a postponement if you need time to gather records. And it's never too late -- even after the audit begins -- to get professional help, such as a tax attorney, certified public accountant or enrolled agent.
"You have rights to contest audits," Nath says, "at every level of the process."
Regardless of what kind of audit you might face, the key is to be prepared.
(from: Freelance writer Kay Bell writes Bankrate's tax stories from her home in Austin, Texas, and blogs on tax topics at Don't Mess with Taxes)
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