The Most Important Tax Tip of the Year – File An Accurate Tax Return to Reduce Your Chances of an IRS Audit
I’ve been talking about how we’re sure to see another surge in IRS enforcement with the growing government deficit.Â With audits on the rise, the most important thing to remember this year is to make sure your tax return is accurate because you don’t want to take any chances with the IRS.
A recent article on bloomberg.com talked about how the IRS will be looking for every dime it can get from taxpayers.Â The U.S. budget deficit has gorwn to a record $455 billion this fiscal year and the Congressional Budget Office estimates it will reach $408 billion for the first two months of fiscal year 2009.
You will want to make sure you are doing everything in your ability to reduce the chances that your return will be picked for audit. Though it’s important to try and reduce your tax bill with savvy income and deduction management, it is critical to avoid all grey areas on your tax returns to stay out of trouble with the IRS. This includes reporting your income as diligently as possible. The article also pointed out several important things you will want to consider:
1. Properly assessing AMT liability. Be aware of alternative minimum tax rules (as regular deductions don’t apply to AMT). The AMT now affects about 4 million taxpayers because it hasnâ€™t been adjusted for inflation. For 2008, married joint filers who earn less than $69,950 are exempt from the AMT.
2. Be aware of the so-called Wash Rule, which prevents repurchase of the same security or fund before or after 30 days from the selling date. Beware of buying a mutual fund before it makes its yearly capital gains distribution, which is usually in mid-December. Record mutual-fund withdrawals have forced managers to sell their profitable stocks to meet redemption requests, triggering distributions and possible capital gains, even if the fund has lost value. â€śIf you buy in right before distributions, some of the money you bought into the fund with will be returned to you as taxable income,â€ť Modly said.
3. Know how charitable giving can help lower tax liability. Donors must itemize their deductions and have receipts for donations over $250, according to Kim Wright-Violich, president of San Francisco-based Schwab Charitable. Checks made out to charitable organizations must be postmarked by Dec. 31 to be deductible this year.
4. IRA Donation – Taxpayers aged 70 and a half and older who donâ€™t need their mandatory IRA distributions can donate up to $100,000 directly to charity under a tax provision extended through 2009. Although the donation isnâ€™t deductible, it is not included as part of income. To qualify, the distribution can only be made to a public charity, not a donor-advised fund or private foundation.
Donors should remember that different rules apply to non- monetary assets, such as artwork, real estate, yachts and airplanes, which should always be appraised, said Wright- Violich. The title of ownership must be transferred from the donor to the charity before the end of the year to get a tax deduction for the same year.
This year and through 2009, joint filers who donâ€™t itemize deductions, but pay real estate taxes, will get an additional standard deduction of up to $1,000 depending on the real estate taxes paid.
For more advice and information on reducing your IRS debt, visit the Tax Resolution Services web site for a free tax relief consultation or call 866-477-7762.
More Tax Help, IRS News and Tax Relief Tips:
- Reducing Your IRS Bill – Two-Part Interview with Tax Tips for Small Businesses and Individuals
- Why the IRS Picks on Small Businesses and How to Avoid Triggering an Audit
- No Income Tax Rate Increase Until 2011 But Expect Increased IRS Audits of Tax Returns in Near Future
- Stop Tax Haven Abuse Bill: Preventing Offshore Tax Evasion Another Sign IRS Enforcement is on the Rise
- Hire a Good Number Cruncher: Save Money and Avoid IRS Problems
Tags: 2008 taxes, alternative minimum tax, AMT, filing tax returns, IRS audits, IRS enforcement, IRS help, Michael Rozbruch, preparing tax returns, tax audit, tax expert, tax returns, Tax Tips, wash rule