Red Flags That Can Get You Audited by the IRS

Written by admin on . Posted in Taxation

Although the IRS only audits 1% of all tax returns processed, being audited by the IRS is still a huge fear of both taxpayers and business owners. While there are many factors that can increase your chance of being audited, if legitimate, it’s important to make sure that everything is properly documented if the IRS comes knocking. Although there is no way to guarantee being able to avoid an audit or no way to predict being audited, it’s wise to familiarize yourself with some red flags that the IRS may be looking for.
  1. Failing to Report ALL Taxable Income

Remember that the IRS receives copies of all 1099s and W-2s, so make sure to report all earned income on your return. IRS agents and their systems are very good at sniffing out discrepancies, which raises a red flag.
  1. Engaging in Large Cash Transactions

The IRS receives many reports of cash transactions exceeding $10,000.00 from institutions like casinos, auto dealerships, banks, insurance companies. Making large cash purchases or deposits raises your chance of being audited, so make sure to keep proper details and documentation for any type large cash transaction.
  1. Claiming a Home-Office Deduction

The IRS is attracted to tax returns that claim home-office deductions because historically it has found success in pursuing these cases. That said, there are great potential savings if you do qualify for this deduction. You can deduct a percentage of your real estate taxes, utilities, phone bills, insurance and other additional costs. Remember that the space must be used exclusively for work purposes.
  1. Claiming Day-Trading Losses

The IRS is no stranger to filers that are investors who report trading expenses or losses due to the significant tax advantages and benefits granted to people that trade daily in securities. When these red flags are detected, the IRS will check to make sure that the taxpayer is indeed a legitimate trader.
  1. Claiming 100% Business Use of Your Vehicle

Claiming 100% business use for your vehicle is another huge red flag for IRS agents. It’s not common for someone to use an automobile 100% of the time exclusively for business. It’s important to keep detailed records of road trips and mileage logs to because bad or no record keeping could to the IRS disallowing your deduction.
  1. Big Deductions for Food, Travel, and Entertainment

Big meal, travel and entertainment deductions are always susceptible to scrutiny by tax agents. It’s imperative to document each expense with details like amounts, attendees, place, business purpose and topic of meeting. Failing to keep detailed records could lead to you losing that deduction.
  1. Claiming Large Charitable Deductions

Charitable contributions are a great tax write-off, besides the obvious emotional benefits of being charitable. However, if your contributions are much larger in comparison to your income, this could earn you a call from the IRS. Agents are well-aware of what the average donation is for people of similar income levels and will question it when disproportionate. Make sure to keep detailed records and supporting documentation to protect your deduction.

Are You Concerned About the Deductions You’re Claiming?

At Verdeja, De Armas & Trujillo LLP, our team of Miami accountants is dedicated to providing personalized, financial guidance. We provide accurate and comprehensive financial statements as well as in-depth business analyses specific to your business or personal needs. Contact us today for a consultation!  

4 Steps to Follow if You Suspect Tax-Related Identity Theft

Written by admin on . Posted in Taxation

tax return fraud Tax-related identity theft has been on the rise every year and is expected to continue to rise. The good news is that the IRS has implemented numerous fail-safes over recent years to assist in detecting fraudulent activity. Unfortunately, these will not deter or slow down identity thieves from continuing to try claim your tax refund as record numbers of fraudulent tax filings are expected this tax season.

What Are Some Waring Signs of Tax Refund Fraud

  • Receiving an IRS letter stating that your taxes have already been filed
  • Failure or denial to file your taxes online
  • IRS records indicating you received wages from an unknown employer

What to Do?

The following is a quick summary of what you should if you’re the victim of tax-related identity theft:
  • If you received a letter from the IRS indicating a tax return was filed already with your social security number, follow the instructions on the letter.
  • Complete IRS Form 14039, “Identity Theft Affidavit.” Fill out the form and submit it with your return.
  • File a complaint with the Federal Trade Commission (FTC) at identitytheft.gov. FTC website is the “federal government’s one-stop resource to help you report and recover from identity theft.”
  • Issue a fraud alert under your social security number with the 3 main credit bureaus:
    1. Equifax: Equifax.com or toll free 1-800-766-0008
    2. Experian: Experian.com or toll free 1-888-397-3742
    3. TransUnion: TransUnion.com or toll free 1-800-680-7289
  • The above list is not all you should do but it helps to get you started. Go to identitytheft.gov for additional information and refer to IRS Publication 4524 “Security Awareness for Taxpayers.”
Remember that the speed of your response is of utmost importance and can make a major difference in the outcome of your case. For additional information on the measures being taken by the IRS, state tax agencies, and private-sector industries, refer to the Security Summit Partners Update Identity Theft Initiatives for 2017 and for information regarding the 2016 filing season refer to IRS, States and Industry Partners Provide Update on Collaborative Fight Against Tax-Related Identity Theft.

4 Steps to Protect Yourself from Tax-Related Identity Theft

Written by admin on . Posted in Taxation

  With the tax season upon us, protecting your identity is more critical than ever. As noted by the IRS, tax-related identity theft occurs when someone uses your Social Security number to file a tax return claiming a fraudulent refund. In many cases, you may be unaware a tax return has been fraudulently filed until you e-file or the IRS sends you a letter that a return has been filed using your social security number. This type of fraud is on the rise and even though the IRS and the states have come together and have enacted various safeguards to combat this type of fraud, there are certain measures you can take to proactively protect your identity.

Below are 4 simple steps to protect yourself from tax-related identity theft:

  1. Protect your social security number! Do not carry your card in your wallet or any other documents that may contain your social security number. Secure your card and sensitive documents in a safe location.
  2. Protect your computer and any other electronic devices that may contain personal information. Maintain firewalls and anti-virus software up to date. Update passwords periodically for personal accounts and ensure you have a strong password using a combination of letters, numbers, and characters.
  3. Check the activity in your credit report annually (or more often). The 3 major credit reporting agencies provide a free credit report on an annual basis.
  4. Avoid divulging personal information through unknown Internet sites, unknown calls over the phone, or unverified emails. These types of scams are known as phishing scams and are geared towards obtaining sensitive information for malicious purposes. Additionally, do not click on links or download anything from suspicious emails.
For additional information on the measures being taken by the IRS, state tax agencies, and private-sector industries, refer to the Security Summit Partners Update Identity Theft Initiatives for 2017 and for information regarding the 2016 filing season refer to IRS, States and Industry Partners Provide Update on Collaborative Fight Against Tax-Related Identity Theft.

The January 31st Deadline For Filing W-2 and 1099-MISC Forms Is Here

Written by admin on . Posted in Taxation

Have you remembered to file your Forms W-2 or Forms 1099-MISC? If not, you’re going to want to make sure they are filed by the January 31st deadline.

The New January 31st Deadline

The new rule for filing on January 31st is required according to the Protecting Americans from Tax Hikes (PATH) Act, which was enacted December of 2015. Employers are now required to submit Forms W-2 to the Social Security Administration by January 31st, as well as for certain 1099-MISC forms, for wages earned in 2016.

Need an Extension to File Your W-2 or 1099-MISC Forms

For those employers who are seeking to file for an extension, there are new rules as well. Employers are now only afforded one 30-day extension to file W-2 forms, which also must be filed by January 31st.

Penalties for Failing to On Time or Properly

Failing to file by the January 31st deadline, which includes failure to file by the due date, failure to provide a copy to the recipient, failure to provide accurate information, or failure to furnish required information, can subject employers to penalties which have been increased significantly.

Need Expert Guidance for Filing Your W-2s and 1099s?

At Verdeja, De Armas & Trujillo LLP, our team of Miami accountants is dedicated to providing personalized, financial guidance. Contact us today for a consultation!  

Set SMART Goals to Help Your Business Succeed

Written by admin on . Posted in Business Plan

Now that 2017 has begun, business owners that are serious and committed to growing their business can greatly benefit from the establish SMART goals for their business. SMART is an acronym that serves as a guide for optimal goal setting using straightforward principles:
  • S – Specific
  • M – Measurable
  • A – Attainable
  • R – Realistic
  • T – Timely
Below are explanations of these principles to help you formulate your own SMART goals for your business:
  1. Specific

Goals should be distinct to ensure there’s no misconceptions of what is trying to be achieved. With clear goals, one can truly focus on the tasks-at-hand in order to get where they want to be.
  1. Measurable

Measuring your progress is imperative to any type of improvement effort. In any business, from retail to restaurants, without measurable goals one cannot analyze and improve.
  1. Attainable

Personal or business goals should be achievable, but don’t mistake that with making them easy. Goals should push people to their limits while still remaining reachable, otherwise you risk losing motivation.
  1. Realistic

Goals being realistic, in comparison to attainable, refers to setting goals that make sense. Can it be achieved? Do you have the time and resources available to reach this goal? Are they relevant to what you’re trying to achieve?
  1. Time-Sensitive

All goals should have a timeframe or target date so you can realize the importance of focusing on the main task. Setting these helps to keep the eye on the prize.

Are You in Need of Professional Tax Guidance?

At Verdeja, De Armas & Trujillo LLP, our team of Miami accountants is dedicated to providing personalized, financial guidance. Contact us today for a consultation!

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