Are you worried about being audited? The fear may be overblown, as only 0.6% of taxpayers had their federal returns examined in 2017 (the most recent information available). Still, no one likes extra stress courtesy of the I.R.S. Let’s look at some red flags that might get you extra I.R.S. scrutiny.
Our new tax law means annual inflation adjustments for more than 60 tax provisions and changes affecting virtually all tax-paying adults in the country—plus the ongoing debate and additional fixes along the way. With tax reform still in the headlines, here is what you need to know about various tax brackets, thresholds, limitations, and exemptions for 2019.
Do you know how the Internal Revenue Service contacts taxpayers to resolve a problem? The first step is almost always to send a letter through the U.S. Postal Service to the taxpayer.
It is very rare for the I.R.S. to make the first contact through a call or a personal visit. This happens in two circumstances: when taxes are notably delinquent or overdue or when the agency feels an audit or criminal investigation is necessary. Furthermore, the I.R.S. does not send initial requests for taxpayer information via email or social media.
Year after year, criminals try to scam certain taxpayers. Year after year, certain taxpayers resort to schemes in an effort to put one over on the Internal Revenue Service (I.R.S.). These cons occur year-round, not just during tax season. In response to their frequency, the I.R.S. has listed the 12 biggest offenses – scams that you should recognize, schemes that warrant penalties and/or punishment.
Charitable gift accounts are popping up at major mutual fund companies and may be a good idea for individuals looking for a tax-advantaged way to support their favorite charities, improve their estate tax situation or bring more order to their gift-giving strategy. These are not necessarily inventions for the rich – some of these funds can start with an initial contribution of $10,000 and allow additional contributions of as little as $1,000.
The Tax Cuts & Jobs Act has nearly doubled the standard deduction and as a result, the vast majority of taxpayers will no longer benefit from itemized deductions.
For many, this is a welcomed change, as it simplifies filing and may even reduce your tax bill, as long as your itemized deductions are less than $12,000 (single) or $24,000 (married filing jointly). Seniors qualify for an additional deduction of $1,300 (single) or $2,600 (married filing jointly).
As a regular part of your family law practice, you may have created or reviewed many prenuptial agreements in the past. They have been filed away by your former client never to be looked at again unless a “situation” arises.
With the tax deadline having just passed, now is the perfect opportunity to start planning for next year. Last year’s return should be readily available, and you may even have many important items committed to memory. Additionally, four months into the year is the perfect time to begin making current year projections. Of course, this year is different. That’s because 2018 will be the first we file under the changes created by the Tax Cuts and Jobs Act (TCJA).
One thing you should do is reexamine your withholding. Back in February, the IRS released an updated withholding calculator that reflects changes under the new tax law. You can find the new withholding calculator here. The great thing about using the calculator is that you won’t have to deal with the new W-4 worksheets. The IRS specifically encourages taxpayers who fall into the following groups to double-check their withholding:
Fewer than 1% of Americans have their federal taxes audited. The percentage has declined recently due to Internal Revenue Service budget cuts. In 2016, just 0.7% of individual returns were audited (1 of every 143). That compares to 1.1% of individual returns in 2010.1,2
The rich are more likely to be audited – and so are the poor. After all, an audit of a wealthy taxpayer could result in a “big score” for the I.R.S., and the agency simply cannot dismiss returns from low-income taxpayers that claim implausibly large credits and deductions.
Contribution limits for most retirement savings accounts, including 401(k) and individual retirement accounts, will not change in 2017, the IRA announced as part of its annual cost-of-living adjustments.
Filling out your tax return is like compiling the index of a book -- the book is complete, but you have to rummage (sometimes painfully) through your work again, assuring accuracy and factual content, in order to make the book easier for someone else to read. If you're a mutual fund investor trying to determine your taxable gain or loss for the past year, your tax return will entail additional work. However, if you've kept good records and understand some basic guidelines, the process can be relatively painless.