The IRS Audit Blog

Archive for April, 2009

Question: What does filing a 673 do for you?

Hello

I work overseas and will be here all year of 2009. I filled out a 673 for Physical Presence Test for 09’ also I won’t be going over the 91,400 IRS limit for the year. Can someone with experience with filing taxes explain what this means in layman’s terms. I can read and read about form 673 but don’t real understand what it does. Will this affect the 2555 form I fill out at the end of the year?

Thanks in advance.

Answer: It means you are an optimist.

You truly believe that you will be out of the US for 330 days in 2009, won’t make enough, after the form 2555, to pay any tax and don’t feel like making an interest free loan to the IRS.

Keep in mind, if you MISS the 330 days (even by just one measely day), you will suddenly owe the IRS all of the money that wasn’t withheld. You will also owe an estimated tax penalty (roughly 4%) because it wasn’t withheld during the year. This is “okay” if you can actually write a check and pay off the IRS by April 15th.

This is, in opinion, very risky if you are going to a war zone or are going without friends/family and likely to get homesick. Most people spend what they have, so they can’t suddenly write a check for $5-$10,000 to the IRS. The IRS payment plan runs 9-18% right now.

What is the Earned Income Credit

One of the difficult concepts for rookie tax professionals and the general taxpaying public is the refundable credit. A high-profile example of a refundable credit is the

Question: Why does the IRS wait until you retire from your job to start checking your last 6 or 7 year tax returns?

Worked until age 65 and never had a tax audit. Now we retire and get letters from the IRS (registured) about an audit of one thing or the other. So when I call up their office, I get get some moody woman who thinks she can probrably walk on water who takes an attitude with me when I ask questions. `Question: Why now after all these years does the IRS want to worry about our taxes and some stuff we have receipts for as donations when we had to move?

Answer: Or you used a preparer who routinely padded tax returns, someone else got audited and so the IRS decided to look at all of the returns they did.

Alternately, so many people were flunking audits that matched your profile that the IRS has tightened the audit net (in their march to closing the tax gap).

It doesn’t help that the amounts of items people say they donated to charity and the amounts of money the charities say they realize when they sell the items are incredibly far apart.

So you donated more items than usual when you moved–did you keep an inventory of what you donated and what values you assigned to them? An awful lot of people donate clothes and put down values that are far more than the charities get for them.

Some Should Wait to Claim Haiti Contributions

At least one tax expert is advising certain taxpayers to wait until next year to claim a deduction for their charitable contributions for Haiti earthquake relief.

Question: Can I go to an IRS office in another state to get a income tax transcript?

I’m in Louisiana and I live alot closer to the one in mississippi.

Answer: Yes you may. You can also call them on the phone and the transcript will come in the mail i a couple of days. At the price of gas, a few minutes on the phone might just be worth it.

Marco Rubio backs off support for oil drilling

CLEARWATER The day after he effectively locked down the GOP U.S. Senate nomination, Marco Rubio tempered his support for expanded drilling in the Gulf of Mexico and wouldn’t commit to releasing state party credit card statements.

Tom Cryer NOT GUILTY! IRS fails again

Fall River submits list of recordkeeping fixes to DOR

Though well behind schedule, the city and its auditing firm recently completed its grant auditing report for fiscal 2006, with a list of findings and procedures to improve the city’s fiscal record keeping.

Turbo Tax Rap: Keep Track Of Your Stack

Question: Do I have to file a tax adjustment form (1040X)?

The day after I got my refund, I received a 1099-B and a 1099-DIV in the mail from a mutual fund I sold and took a bit fat loss on. However, there are capital gains ($41.77) and dividends ($40.28) on it. Do I need to file an adjustment, or is the amount small enough that I can claim it next year? I tried to read the directions but was just baffled by it, and the IRS help desk didn’t know.

Answer: You need to declare ALL income in current year on your current tax return. You’ll need to file 1040X to amend your tax return even if you don’t owe taxes on the income. If you fail to do so, you will eventually get a “love letter” from the IRS asking about the income. Depending on your total income, you may or may not owe taxes.

PUC programs target community

The start of a new year — and decade — has triggered a renewed commitment to volunteerism and service learning as part of the educational experience at Purdue University Calumet. In response, PUC’s Office of Student Affairs is inviting students to partake during the upcoming months in three distinct initiatives intended to provide much-needed community assistance and valuable learning. They …