Tax Season 2012

It’s that time of year again!  Tax season is upon us, and in today’s show we focus on some tips to make your 2012 tax preparation as seamless as possible.

One of the most stressful elements of tax preparation is the possibility of being audited.  In a recent U.S. News article, David Francis shares the best ways to sidestep this fear.

How to Avoid an IRS Audit:

• Who gets audited?  According to Michael Rozbruch of Tax Resolution Services, only about 1.1 percent of people (roughly 1.5 million) who filed a 1040 for the 2010 tax year were audited.  For those earning $1million or more, the audit rate was 12.5 percent.  It seems that audits are one of the few times that having a lower salary is an advantage.

• What sets off an audit?  Karen Reed from TaxResources Incorporated says that audits are most often triggered by the kind and amount of deductions taken.  This can include charitable contributions, employee business expenses, and vehicle expenses.  An additional trigger is a tax return that does not appear to support the lifestyle of the person filing the return.

•  What do you do if you get audited?  We strongly feel that you should seek a professional for ALL audit cases.  The auditing process can be very intense and stressful.  Having representation from a professional can help alleviate some of that stress.

• Are there certain types of write-offs that raise red flags with IRS agents?  Certain deductions can raise a red flag.  For example, the First-Time Homebuyer Credit, the Earned Income Credit, and the Adoption Credit are often audit targets because they are often abused.  Keeping detailed records is a good way to protect yourself.

• If you’re found during an audit to have made mistakes on your taxes, how do you square things with the IRS?  The best thing to do is attempt to make things right immediately.  The IRS may even be lenient if you can show that the error was an honest mistake.  If you find an error on your return yourself, you can file an amended return within 3 years  to replace the original.

In addition to avoiding an audit, we also wanted to share these 5 Little-Known Tax Deductions from Bill Bischoff:

1. Medicare Insurance and Long-Term Care Premiums
2. Medical Expenses Paid by Someone Else
3. Real Estate Taxes Paid by Someone Else
4. Home Mortgage Points Paid by Someone Else
5. Fees to Charge Taxes to Your Credit Card

As you listen to the show, we share ways that taxpayers have been able to deduct the above expenses in the past.

As you prepare to file your taxes this year, we hope you can apply some of the tips from today’s show.  Try to stay organized, keep detailed records, and enlist help from a professional if you feel overwhelmed.  We would love to hear any questions or feedback below or on our Facebook page.

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