The IRS Audit Blog

Archive for March, 2006

McCollum now acknowledges ties to 2 groups attacking Scott

After weeks of denying it, Republican gubernatorial candidate Bill McCollum has disclosed that he is raising money for two of three secretive political committees attacking his primary opponent, Rick Scott.

Tips & Advice for Income Tax Deductions : Tips for Reading IRS Letters for Income Taxes

Question: I have a home business- need tax advise what do i do???

I have an at home based business. that actually provides a beauty service. I sell no product. But I have a designated room in my home for this. i dont have a corp or llc or s corp. i just work from home doing my service., to be more specific i do eyebrow threading. its an alyernative to facial waxing. I want to know whats the best way to take advantage of deduction with this type of business. I also get alot of payment thru cash. si what should i do before tax time to get the greatest return and avoid red flags and audits.
I dont own my home i rent, i have a designated room for this purpose, & I am not in india i am in the US. usually my husband and i do joint filling with him as the sole bread winner, Iam stay at home mom. But I started this, side work and it has turned out very well for me. so hearing about all the benifits of home based business, i wanted to see what i could do. would selling product be a way to legitmize my earnnings

Answer: You could write off a portion of your home for business, but this is the #1 red flag for an IRS audit for self employed people, so be sure that EVERYTHING you are deducting for this purpose has proof and receipts to justify this deduction. The room has to be used SOLELY for your business. I’m not an expert but we ran a contracting business through our home for over 10 years. We never used the home deduction just because it creates a nightmare when you sell your house (tax recapture and all that junk) that we didn’t want to deal with & we had enough other expenses that we didn’t need the hassle of that one. Of course, since you rent, it’s different. I’m not sure if this is legal (CHECK W/THE IRS FIRST) but you might be able to write out a separate check for that portion of your home (convert your square footage into a percentage) and use that as a rent expense for your business instead? Again – doublecheck. Basically, if all your payments are coming in as cash, and no one is claiming you as a deduction (sending you a 1099 form at the end of the year) then you really don’t have to report it as income (((dodging eggs from IRS))). If your income & expenses don’t justify all the headache of filing a schedule C, you may want to reconsider legitimizing it unless you plan to expand into a store front or purchase a major amount of equipment. You could show a loss this way and reduce the amount of tax you would normally pay between this income and your husband’s income, but that can only be done a couple of times before flagging an audit. Not sure what state you’re in, but in CA in order to sell products you have to collect sales tax and report to the state every quarter – it’s a major pain!

Report finds controlling shareholders in India have too much power, situation ripe for abuse

MUMBAI, India – One year after the founder of Satyam Computer Services made an astonishing confession to the largest fraud in Indian corporate history, many say that what really sets R. Ramalinga Raju apart is not his malfeasance, but the fact that he got caught.

KPMG | Global Internship | India | Living Arrangements

IN BRIEF

Pahrump Valley United Methodist Church will present “Rekindle the Glow,” a women’s renewal fellowship Jan. 30 at the church. All women are invited to attend. A continental breakfast and lunch will be provided.

Chuck Baldwin at the 2008 Conservative Leadership Conference (Part 1)

Question: What are good free places to get good advice on nonresident tax?

I’m usually pretty good at deciphering the IRS forms and publications for individual taxation, but have some simple dilemmas that leave my stymied. H&R block doesn’t know jack squat, and I get various answers from accountants who don’t seem to care much. I can always go to the IRS directly, but it tends to be my last resort and besides, the people who pick up the phone there don’t necessarily have accurate answers either.
I’m an individual who earns a modest income and am not gonna spend hundreds of $$’s on a big-shot tax expert.

So far I posted at taxforum.us, are you familiar with any other good online resources to go and ask?

Answer: If you are non-resident alien, start by reading IRS publication 519 and 515.

If you are living abroad, start by reading IRS publication 54 and 514.

IRS Makes it Harder for Middle-Class to E-File for Free

Most middle and upper-class Americans will not qualify for free IRS e-filing.

HHO4Dummies Lesson 102 video 1of 5

Question: Earned Income Credit Question?

I’m filling out a financial aid worksheet and it asks for the earned income credit. I have the IRS Form 1040a and it tells to me to look on line 40a. It is blank to what does that mean? My dad told me to look at the taxable interest on Line 8a to use as the EIC but on the worksheet it says Line 8a is for the IRS Form 1040EZ. So do I put my dad’s EIC as zero?

Answer: If the line for EIC (earned income credit) is blank, then there IS no earned income credit.
If you want to know what earned income credit actually is, you can go to http://irs.gov and inform yourself there.
If your Dad has not received EIC as evidenced by his tax forms, do not substitute any other stuff such as taxable interest. Just put ZERO.

Getting the most from tax software

Don’t want to spend hours on your return? Tax-preparation software may be the answer.

How to Complete and File a 1040EZ Tax Form : 1040EZ Tips for Line 5