Felix Agbessi, President
& CEO of My Accounting Partner, LLC has published an article in The Anointed News Journal of Chris Collins, Volume 18 Issue 9 November
2012 Edition, Page 14.
Here
is a copy of the article.
It’s your responsibility! How to stay out of trouble with the IRS –
Tips for individuals and small business owners
Taxes are serious business, especially now. The automation of tax returns and our digital
age has made it easier for the government to catch errors and inconsistencies. Many
people who don’t enjoy the process depend on their tax preparers to keep them
out of trouble and will sometimes submit their taxes without thorough reviewing,
or having any understanding about what they actually say.
In the Bible, Hosea 4:6 (KJV) reads “My people
perish for a lack of knowledge”.
During my career as
a Tax Preparer, when I interviewed Taxpayers for the first time and they showed
me their income tax return for the prior year, they used to say they didn’t
know anything about their returns; “It was done by the tax preparer”. The
taxpayer was unable to explain where the numbers were coming from and that is
dangerous. What people don’t realize is,
if it has your name on it, You are RESPONSIBLE, Period!
If you are ever
audited, or the government decides to review your account, or they ask for
additional information you could find yourself in BIG TROUBLE. If you can’t provide the information they
need or you can’t explain where those number came from you could be signing
yourself up for a headache! This principle is the same if you are doing the
return by yourself.
Know
What’s Expected! Your Income Tax Responsibility
The Tax Preparer should prepare your Federal and
State returns based on information you provide. Although their work will not
include procedures to discover irregularities or inaccuracies in the tax data
you provide, they may ask for clarification of certain information, or
additional information, so that they can prepare accurate and complete returns
for you.
It is your
responsibility to provide all necessary information related to your income and
deductions for the tax year.
You are also responsible
for maintaining appropriate records, such as official tax documents you
receive, receipts and substantiation for your deductions, purchases and sales
information for assets.
Please know that it
is your responsibility to review your returns before they are filed to
determine that all income has been correctly reported and that you have substantiation
for your deductions. Filing your returns by the due dates is your
responsibility.
The Burden of Proof Belongs to You
You should be
able to justify or prove any entry, deduction, or statements on your tax
return; this is called the Burden of Proof.
You must be able to prove any expenses that you have
deducted. You should keep adequate records to prove your expenses or have
sufficient evidence to support them just in case you ever have to give the IRS
proof. You need to have documentary evidence, such as receipts, canceled
checks, or bills, to support your expenses or an item of income or a deduction,
or a credit appearing on a return. For example, in order to claim a credit for
child and dependent care expenses, you should be able to prove the person or
organizations that provided the care to your qualifying dependents, their
address, Tax ID, amount paid, etc.
Additional evidence is required for travel,
entertainment, gifts, and auto expenses.
Did you know there are many hot spots on your return that can
raise red flags by the IRS?
Let’s talk about two, where I saw many taxpayers used to struggle with:
Claiming the home office deduction - If you qualify, you can
deduct a percentage of your rent, real estate taxes, utilities, phone bills,
insurance and other costs that are properly allocated to the home office.
That's a great deal. However, to take this write-off, you must use the space
exclusively and regularly as your principal place of business. That makes it
difficult to successfully claim a guest bedroom or children's playroom as a
home office, even if you also use the space to do your work. "Exclusive
use" means that a specific area of the home is used only for trade or
business, not also for the family to watch TV at night. Don't be afraid to take
the home office deduction if you're entitled to it. Risk of audit should not
keep you from taking legitimate deductions. If you have it and can prove it,
then use it.
Claiming 100% business use of a vehicle - Claiming 100%
business use of an automobile is red flag for IRS agents. They know that it's
extremely rare for an individual to actually use a vehicle 100% of the time for
business, especially if no other vehicle is available for personal use. IRS
agents are trained to focus on this issue and will examine your records. Make
sure you keep detailed mileage logs and precise calendar entries for the
purpose of every road trip. Sloppy recordkeeping makes it easy for the IRS
agent to disallow your deduction. As a reminder, if you use the IRS' standard
mileage rate, you can't also claim actual expenses for maintenance, insurance
and other out-of-pocket costs. If you use your car in your
business, you can deduct car expenses. If you use your car for both business
and personal purposes, you must divide your expenses based on actual mileage.
If
you want me to talk to you about how taxation issues may impact your future.
Please contact Felix at My
Accounting Partner at (856) 677-8052 or send your request by e-mail to felix@MyAccountingPartner.com
Website:
www.myaccountingpartner.com
About
the Author:
Felix Agbessi is the President & CEO of My
Accounting Partner. He has more than 25 years of accounting, tax and business
consulting experience in various industries.
Additionally, he is an IRS Enrolled Agent, Authorized IRS e-file
Provider, a Certified QuickBooks ProAdvisor and holds an MBA with a
concentration in Accounting. He works
with Individuals, Non-Profit Organizations and Small Business owners.
What
is an Enrolled Agent?
Enrolled Agents
(EAs) are America’s tax experts. They are the only federally-licensed
tax practitioners who both specialize in taxation and have unlimited rights
to represent taxpayers before the Internal Revenue Service. These tax
specialists have earned the privilege of representing taxpayers before the IRS
by either passing a stringent and comprehensive three-part examination
covering individual tax returns, business tax returns and representation,
practice and procedure, or through experience as a former IRS employee. All
candidates are subjected to a suitability check conducted by the IRS.
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