The IRS Audit Blog

Archive for May, 2008

Coming up in the Chesters, Mendhams, Harding and Washington Twp.

THURSDAY, Jan. 7 The Chester Lioness Club will celebrate the new year with a dinner and meeting at 6:30 p.m. in the Lamplighter Restaurant, 190 W. Main St. The speaker, Jill Lattmann, will discuss health tips and easy ways to obtain the seven to 13 servings of fruits and vegetables a day as recommended by the federal government for good health. The public is invited to attend by reservation only …

SMVM – WKAR BROADCAST MILITIA FIELD DAY 2009

In November 2009, the IRS launched a new National Research Program Initiative (the Initiative): an industry wide detailed random audit of employment taxes for 6,000 businesses over the course of the next three years. The purpose of the Initiative is two fold: (1) assess systemic employment tax compliance; and (2) collect assessments from delinquent employers.

With tax revenues dwindling from the recession, the U.S. Treasury Department is stepping up efforts to close the tax gap the difference between overall tax liabilities and taxes paid to the IRS. Auditing employment taxes is seen by the IRS as a crucial means of closing the tax gap. For tax year 2001 for example, the gross tax gap was estimated by the IRS at around $345 billion, with underreporting of employment taxes accounting for around 17% of the tax gap.

The IRS will audit businesses to ensure that Federal withholding taxes are deducted and paid over to the government from employees wages for Social Security and Medicare as well as Federal Unemployment taxes. An employer found to be in noncompliance could face stiff civil penalties and interest on unpaid taxes. These penalties could have a particularly severe impact on small business owners.

The IRS has prioritized four areas to focus their auditing efforts under the Initiative, including:

aE¢ Worker classification: i.e. whether an employer properly classifies an employee as an employee or independent contractor for tax purposes. Determining which depends on the behavioral, financial and type of relationship the company has with the person performing the work.

aE¢ Employee fringe benefits: A fringe benefit is a form of pay for the performance of services. i.e. benefits such as insurance coverage, company car or child care, etc. that are provided by employers tax free to employees but not to independent contractors.

aE¢ Reimbursed business expenses: e.g. reimbursement for taking a client to lunch, purchasing office supplies: which requires a written business expense plan. I.E. You must have paid or incurred expenses that are deductible while performing services as an employee. You must adequately account to your employer for these expenses within a reasonable time period, and you must return any excess reimbursement or allowance within a reasonable time period.

aE¢ Compensation of owners who are also employees of the company, whereby unpaid taxes may result in personal liability for the employer.

Now that the Employment Tax audit Initiative has started, it has been reported that the IRS has already begun the process of selecting businesses for audit of their employment taxes. Noncompliance with employment tax law can result in severe consequences for employers. To ensure that procedures are in place for Employment tax compliance with applicable tax law can save time, money and heartache in the event of an audit.

For example, the Internal Revenue Code requires a written reimbursement plan in order to take advantage of the tax benefits of legitimate business expenses. Employers should consider consulting with experienced counsel in preparation for the Initiative and in the event of an audit of their employment taxes.

BURLINGTON COUNTY: Freeholders name Garganio director

Former Florence councilman Bruce Garganio joined the county government Jan. 1 when he began his first term as a member of the Board of Chosen Freeholders and became its director for 2010.

Turbo Tax Rap — Aw Dip (The Audit Song)

Question: My childs father and I share custody, this was my year to claim her on taxes and he claimed her before I could

I have full physical custody. We have a standard Oklahoma Visitation Custody Schedule. Wed – Sun one week, Wed – Fri the next. He is required to provide insurance and pay for child care when needed. He quits his job every 3 or 4 months and has to start over on benefits, so his insurance coverage is sporadic. We are supposed to split all co-pays and uncovered medical expenses down the middle. I always pay mine without asking him for anything, he always askes me to pay. There are many other unbalanced issues I just deal with in the interest of peace. Every time I ask him for a dollar, he threathens to sue me for full custody. We have an agreement, in our court order that states we will flip flop years claiming her on taxes. He knew it was my year as his wife called me to verify because she forgot. My accountant has advised me and my attorney is involved, because as soon as he realized it would cost him the EIC + stimulus, he is suing me for full custody. Looking for opinions.

Answer: Since his employment record and his ability to care for the child are basically crap, I don’t think you have to worry about him getting sole custody. Explain to the judge he is simply trying to save money by taking custody and that he is a louse who quits his jobs on a whim and doesn’t provide squat for his own kid.

Court: Part of Oklahoma immigrant law enforceable now

OKLAHOMA CITY (AP) — A federal appeals court panel on Tuesday upheld much of an injunction against Oklahoma’s tough anti-illegal immigrant law but said the state can now force public contractors to…

Oklahoma Senate Passes Bill to Provide Military with State Income Tax Exemption

Question: I need help sorting out an IRS problem!!!?

My boyfriend is being persued by the IRS because his employer in 2004 filed his W-2 saying he was paid “other income” instead of a wage (like his other employer did the same year). He is here from Australia with a H2a visa working in agriculture. He has filed a form 1040 and has sent documentation to the Irs with copies of his visa and passport. However the IRS now want a schedule SE filled out and sent in. His income was not self employment, the farmer he worked for had to sponser him to even bring him here to work for him. So what can he do? He goes home in October and wants to be able to come back in a few months. Will this affect that? Should he just pay the taxes and move on even though it’s not right? I tried filling out a 1040 NR for him to see if he filed the wrong forms but it came out saying he owed even more in taxes ($900 when with the regular 1040- inlcluding self employment tax-he only has to pay $500 ) please help!!!!

Answer: Tax matters can be exceedingly complicated, even for residents. I suggest you contact a tax attorney.

2009 Tax Changes for the Self-Employed

NASE Offers Self-Employed Tips for Getting a Jump on the Filing Season

TurboTax Rap Contest

Question: are there any instances where a parent would not be able to get earned income credit for their child?

my aunt has been seperated from her husband for years now and for the past 4 years the IRS has said she couldnt get the EIC for her child, they have requested all his report cards and other things to prove that he has been in her household the whole year and they still deny her, she hasn’t made no more than $15,000/yr. And she doesnt understand why. They tell her no one else is carrying him, but she can’t get that credit for him……anyone with any insight, the IRS told us to go to the publication #17, but she fits the category to receive it, still nothing….

Answer: If she is filing separately she will not get the credit. When you file separately you lose several credits. If she has lived apart from her husband for more than 6 months and she supports the child then she can file as head of household. That will probably fix the problem.

Even in tight times, it’s possible to start saving

I think we can all agree on one thing: Saving is good.

Operation Money Movement