Tax Audit - Real World

My wife and I have been the subject of a tax audit since the beginning of the year (2010) and while many fear it, we just seem to take it a day at a time. This is not to say it has been taxing as they say, an audit expected to take 60-90 days continues mainly due to scheduling during the year of our availability matching up with the auditor that was assigned to do the audit. The reason for the audit was there were a number of questions regarding our 2008 return that IRS felt best could be answered by us sitting down and discussing it. My wife is a certified CPA and takes care of all our taxes and related business needs. It has been a bit challenging in that our daughter decided to personalize our desktop computer that had been our primarily business computer, and erased all the business related information that tends to get asked for in an audit. We have spent countless hours re-creating many of the required expense related documents. The good news is that my wife keeps everything so most of the raw material required to accomplish feat has been available but not without quite a bit of digging through loads of files for the year in question. Each time we meet with the auditor a new list of questions require us to dig a little deeper. However, as we near the end of the year hopefully we are also nearing the end of the audit. It has been quite a learning experience in making sure you keep track of those things that come together to make up your return. It also helps to remember where you stored the tax related documents that I believe by law you need to keep for seven years.

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File On Time Even If You can't Pay

Taxpayers will have until Monday, April 18 to file their 2010 tax returns and pay any tax due because Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15. By law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have three extra days to file this year. Taxpayers requesting an extension will have until Oct. 17 to file their 2010 tax returns.

As the day draws near many of us are stressed to the max on getting our income tax filed on time. I have always been one those you hate that say something like I already have my refund check because I filed as soon as I received all the 1099’s from the previous year. However, I know that is not the case for many and as the deadline draws near, many are working hard to get it done. However, you may not be aware of the IRS is ok with you filing on time even if you can’t pay. If your return is complete and you are unable to pay the amount of tax due, you need not request and extension. You can chose to pay an installment of amount due and the IRS will send you a bill or notice for the balance due. You can actually apply online to make payments at the IRS website at http://www.irs.gov and click “Apply for an Online Payment Agreement (OPA)” at the left side of the home page under Online Services. If you are unable to make payments, call the IRS at 800-829-1040 to discuss your options. What many don’t realize is an extension only allows you extra time to complete your paperwork it does not extend the time you have to pay tax that is due. You will be required to pay interest on the amount you own when paid anytime after the April 18 deadline, plus any other penalties you might own. If you chose to file an extension you will require the Form 4868 and it should be filed by April 18, 2011. Since almost everything is online these days you are able to E-file your return or extension and the IRS will acknowledge receipt. The forms required for filing an extension are free and obtainable on the IRS form website. You may request EFT electronic funds transfer if you choose to pay balance via your checking or saving account for information about these and other methods of payment, visit the IRS website at http://www.irs.gov or call 800-TAX-1040 (800-829-1040). If you need to file an extension form 4868 is available for download from the IRS website or may be ordered by calling 800-TAX-FORM (800-829-3676).You can also obtain the form at your local IRS office. Telephone requests normally take 7 - 15 days to process and ship. If you are making a payment to the IRS a few things you should know. Never send cash! If you file electronically, you can file and pay in a single step by authorizing an electronic funds withdrawal via tax preparation software or a tax professional. Whether you file a paper return or electronically, you can pay by phone or online using a credit or debit card. Electronic payment options provide an alternative to paying taxes or user fees by check or money order. You can make payments 24 hours a day, seven days a week. Visit the IRS website at http://www.irs.gov and search e-pay, or refer to Publication 3611, IRS e-File Electronic Payments for more detail. Enclose your payment with your return but do not staple it to the form. If you pay by check or money order, make sure it is payable to the “United States Treasury. Always provide your correct name, address, Social Security number listed first on the tax form, daytime telephone number, tax year and form number on the front of your check or money order. Complete and include Form 1040-V, Payment Voucher, when mailing your payment to the IRS. Double-check the IRS mailing address. This will help the IRS process your payment accurately and efficiently.