Right?

Not really. As you probably already know, it was revealed this month that IRS agents spent more than a year singling out specific organizations for extra scrutiny. As the LA Times reports:

Congressional investigators are broadening their inquiry into the Internal Revenue Service’s mishandling of groups seeking tax-exempt status, indicating that they plan to examine how the agency dealt with a wide swath of nonprofit applications during the last three years.

An inspector general’s report found that some 501(c)4 applications by conservative groups were singled out for extra review and that the groups were sent intrusive requests for additional information.

“Targeting applicants for tax-exempt status using political labels threatens to undermine the public’s trust in the IRS,” the senators wrote. “Lack of candor in advising the Senate of this practice is equally troubling.”

This case is alarming for a variety of reasons. It makes one wonder how much more of this type of behavior exists but simply goes undetected.

More practically, it erodes confidence in the IRS. A taxpayer that is engaged in an audit or a tax dispute already feels like he or she is in an impossible situation—but the knowledge that IRS agents have been known to violate the law makes it seem even worse.

And then there is the hypocrisy—an agency that expects taxpayers to account for every penny they spend and follow every obscure regulation doesn’t hold themselves to the same standard. It’s disappointing to say the least.

All of this underscores the need to work with an attorney who understands tax law. You clearly can’t expect the IRS to play by the rules—so if you’re facing an IRS dispute, give us a call and let us keep them honest. Please feel free to contact us today to learn more!

In all seriousness, this is a great time to review your strategy in order to determine whether you need to change things moving forward. Perhaps your current strategy increases the chances that you will face an audit or an IRS dispute—or maybe it’s leading to overpayment of taxes.

Whatever the case may be, it makes sense to review your strategy as we move into 2013. This is particularly true for business owners and self-employed individuals because their tax filing requirements can be particularly complicated. In that spirit, today I’d like to share five critical steps that every business owner should keep in mind as they consider their tax strategy.

1) Withhold, withhold, withhold. The most common reason that the self-employed get into trouble with the IRS is because they haven’t been withholding money for taxes. Because you don’t have an employer to withhold taxes from each paycheck, it’s up to you to withhold on your own. Twenty percent is usually a good place to start.

2) Keep business expenses and personal expenses separate. Mixing up your business transactions and personal transactions can be an accounting nightmare—but worse, it’s a giant red flag to the IRS. Separate bank accounts and credit cards are highly recommended.

3) Keep accurate records of income. If the IRS audits you and finds that you didn’t report all of your income, you will face substantial penalties. Record your income and report it accurately. It’s not worth trying to hide income from the IRS.

4) Record your expenses and deductions. As a business owner, you are entitled to a variety of tax deductions—everything from vehicle mileage to a home-office deduction. But if you don’t record it, you can’t claim it. So keep ALL necessary records! This is vital in the event that you are audited by the IRS.

5) Don’t stress yourself out. Sure, dealing with the IRS isn’t pleasant. But if you are disciplined and keep careful records all year long, tax season doesn’t have to be a painful and stressful experience.

Questions or comments? Would you like to learn more? Or perhaps you need assistance resolving an IRS dispute? We can help- please feel free to contact us today!

1. E-file your taxes. It’s a fast, easy and accurate way to file, and for most people it’s free. The IRS’s Free File partnership with several tax software companies allows most filers to prepare and e-file their returns free online. It’s only available at www.irs.gov . Extensions are free, too, through IRS Free File, but must be filed by April 15.

2. Don’t miss the earned income tax credit. Many lower-income workers, including some grandparents raising grandchildren and rural residents, miss out on EITC each year. Even if you couldn’t claim EITC on previous tax returns, changes in your income or marital status or having a child may allow you claim it for 2012. If you worked some part of last year and your household income was below $50,270, you may qualify for EITC. Use the EITC Assistant at IRS.gov to find out.

3. Watch out for tax scams. Emails that appear to be from the IRS probably are not. Scammers may go phishing for your private information by alerting you to a nonexistent refund or threatening you with an audit if you don’t respond. The IRS never uses email, texts or any social media to initiate contact with taxpayers. Never.

At this point, you’ve still got time to complete your taxes—but remember that if you fail to have your return completed and postmarked by April 15, your return is late and you are subject to IRS penalties. In addition, waiting until the last moment often causes increased stress—and increases the likelihood of mistakes as you rush to beat the deadline. So don’t put it off much longer!

If you’d like help preparing your tax returns, we would be glad to assist. In addition, if you’re facing an IRS dispute or other complications, we can help. Our team is standing by… please get in touch with us today!

Also, by paying with a credit card you may be overlooking options to pay your debt that will charge you less interest over the long run. There is the possibility that you may qualify to set up an installment-payment plan with the IRS directly. While the interest rate the IRS charges is subject to change there is a good chance it is cheaper than the interest rate that you will get from your credit card company.

Keep in mind if your tax debt is extreme, delinquent and/or you are facing IRS collection actions make sure you contact a reliable tax attorney to find out the best options available for your situation. To read the SmartMoney article about paying your taxes with your credit card see http://www.smartmoney.com/taxes/income/tax-tips-should-i-pay-my-taxes-with-plastic/

If you are dealing with tax debt, IRS collection, or are afraid that you will be in the future it will serve you well to speak with a tax attorney who knows how to handle your case the right way. A reliable tax attorney will know all of the options that are available to you and will be able to advise you on the best options available for your specific situation. Bankruptcy may be a good option for you but hesitating to take care of your tax problem is not. Learn more about your options. See http://www.irsallstar.com/our-services

Included in this helpful book is a chapter written by tax attorney John P. Willis who gives us advice on how to select an allstar tax resolution team. This chapter walks you through the process of finding a reputable tax resolution professional and what qualifications that representative should have. He also touches on the tax resolution fee structure and why guaranteed results should raise concerns when dealing with a tax resolution professional.

Click here to learn more about the book and Tax Resolution Attorney John P. Willis. http://www.irsallstar.com/news/tax-resolution-attorney-john-p-willis-iv-signs-publishing-deal-with-celebritypress-to-release-protect-and-defend.php

File Your Tax Returns on Time

Making sure you file your taxes correctly every year for yourself as well as your business will help you avoid the slippery slope to larger IRS problems. Filing on time helps you avoid penalties and fees. Also if the IRS ever audits your returns the fact that you filed on time will be in your favor.

Pay Future Taxes

The number one reason taxpayers have IRS problems is due to the fact that they didn’t pay taxes they owed. If you want to avoid tax problems you must make sure you “Pay As You Go”. This means that if you are employed make sure that your current tax withholding is enough to pay this years taxes! If you do not know how to figure this out then you must find a competent professional who can help you.

If you are self-employed you can really hurt yourself with the IRS. Since no one is taking out tax withholdings from your checks you can make the mistake of not setting aside and paying the correct amount of taxes needed for you to be safe at tax time. In order to avoid problems with self-employment pay you need to pay Estimated Taxes. By doing this you will also be showing the IRS that you have good intentions to pay and this may work in your favor if there are any problems.

There is an easy way to pay the IRS during the year. Basically, whenever you get a check or cash from a customer as payment you should immediately take 20% of the check or cash and send it to the IRS for this year’s taxes. The percentage may be a little high or low but it is a starting place and can be adjusted later. By sending in an estimated tax to the IRS you can avoid owing more at the end of the year then you can afford. Make sure you send the check or money order with you name, social security number and the words “1040ES Tax Year 20XX”(“XX” is the year in question) written in the memo area. Make sure you keep a clear record and copies of the checks or money orders that you do send.

If you follow these simple tips you can avoid a lot of future problems with the IRS. If tax issues do arise the IRS is more likely to look kindly on your case since you showed a certain amount of good intention in regards to your tax responsibilities.

Again, if you are confused by your taxes make sure that you get competent help from a professional. If you find that you have not done so well with your taxes in the past, owe tax debt, have not filed in awhile or have the IRS pursuing you for unpaid taxes make sure you find a reliable tax attorney to help you take care of your tax problems the right way. http://www.irsallstar.com/

Dependents. In most cases, you can claim a child as a dependent even if your child was born anytime in 2012.   For more information, see IRS Publication 501, Exemptions, Standard Deduction and Filing Information.

Child Tax Credit. You may be able to claim the Child Tax Credit for each of your children that were under age 17 at the end of 2012. If you do not benefit from the full amount of the credit, you may be eligible for the Additional Child Tax Credit. For more information, see the instructions for Schedule 8812, Child Tax Credit, and Publication 972, Child Tax Credit.

Child and Dependent Care Credit. You may be able to claim this credit if you paid someone to care for your child or children under age 13, so that you could work or look for work. See IRS Publication 503, Child and Dependent Care Expenses.

Earned Income Tax Credit. If you worked but earned less than $50,270 last year, you may qualify for EITC. If you have qualifying children, you may get up to $5,891 dollars extra back when you file a return and claim it. Use the EITC Assistant to find out if you qualify. See Publication 596, Earned Income Tax Credit.

Adoption Credit. You may be able to take a tax credit for certain expenses you incurred to adopt a child. For details about this credit, see the instructions for IRS Form 8839, Qualified Adoption Expenses.

You’ve worked hard for your money all year long—so don’t pay the IRS a penny more than you must. As a parent, there are a number of opportunities to save money on your taxes. If you’d like to learn more, or if you’d like help maximizing deducting and credits when you file your taxes, please get in touch with us today!

I want to direct you to a fascinating article written by a former IRS Revenue Officer. He admits that the motive of IRS tactics is not so much about collecting the money, as it is about instilling fear and creating a vision of massive IRS power in the eyes of the public. In reality, there are not enough IRS Revenue Officers to handle all of their collection cases. It is much easier to create the illusion of fear in order to scare people into compliance. This former IRS employee was encouraged to seize property and create a big ruckus in the media when he knew full well that these taxpayers would be eligible for installment agreements and other collection alternatives to help them deal with their tax debts. This former employee talks about one administrator he knew who earned a promotion by refusing every offer in compromise brought before him.

As a taxpayer who may be in trouble, this is what you are up against. This is why having an experienced and knowledgeable tax attorney is critical to your success. Eliminating this “fear-factor” and removing the “drama” is one of the reasons why I love doing what I do. Together we can figure out your issues and get your life back! I encourage you to call us today: http://www.irsallstar.com/

Also, to read the full story from the former IRS agent, check the article here: http://www.unclefed.com/TxprBoR/JWWade.html