Archive

The Internal Revenue Manual (IRM) alone indicates the there are over 140 separate penalty provisions. The primary penalties which pertain to individual tax returns are: Penalty for failure to file a return (IRC Section 6651) Taxpayers who do not file a timely tax return may be fined 5% per month of the amount of tax […]

The tax law is very complex and sometimes unclear and confusing. Both CPAs and IRS representatives can give you wrong answers. Some CPAs don’t do much tax work and are unfamiliar with the intricacies of the system, Some IRS representatives are newly hired and inexperienced and can give you misleading answers. When you get conflicting […]

Auditors are trained to spot common types of fraudulent acts by taxpayers. The acts are called badges of fraud. Auditors know that the tax law is complex and expect to find few errors in every tax return. The most common “badges of fraud” commonly used by taxpayers to deceive or defraud the government include the […]

The IRS selects returns using a variety of methods, including but not limited to: Computer Scoring — Some returns are selected for examination on the basis of computer scoring. Computer programs give each return numeric “scores”. The Discriminant Function System (DIF) score rates the potential for change, based on past IRS experience with similar returns. […]

You sometimes may benefit from filing separately instead of jointly. Consider filing separately if you meet the following criteria: One spouse has large medical expenses, miscellaneous itemized deductions, or casualty losses. The spouses’ incomes are about equal. Separate filing may benefit such couples because the adjusted gross income “floors” for taking the listed deductions will […]

Losses on the sale or exchange of personal use property, including a loss on the sale of your home used by you as your personal residence at the time of sale, is not deductible. Only losses associated with property used in a trade or business and investment property (stocks) are deductible.

If you can claim your daughter as a dependent on your income tax return, she cannot claim herself on her income tax return. If an individual is filing his or her own tax return, and the individual can be claimed as a dependent on someone else’s return, the individual cannot claim his or her own […]

If you are an unmarried dependent student, you must file a tax return if your earned and/or unearned income exceeds certain limits. To find these limits refer to Dependents under Who Must File, in Publication 501, Exemptions, Standard Deduction and Filing Information. Even if you do not have to file, you should file a federal […]

To be claimed as your dependent, your child must meet the qualifying child test or the qualifying relative test. While the child’s age is a factor in the qualifying child test, it is not in the qualifying relative test. An individual meeting the qualifying relative test may be of any age. As long as all […]

Although both of these forms are called information returns, they serve different functions. The Form W-2 is used by employers to: Report wages, tips and other compensation paid to an employee. Report the employee’s income and social security taxes withheld and other information. See General Instructions for Forms W-2 and W-3 for more information. Report […]