4 Keys to Surviving a Tax Audit

    You’ve just received the dreaded letter from the IRS, which says that either your personal income taxes or your business taxes are about to be audited. The IRS will perform one of three types of audits: a correspondence audit, an IRS office audit or a field audit.

  1. A correspondence audit is conducted through the mail. The IRS is probably asking for specific documentation of a certain item on your tax return.
  2. An IRS office audit usually checks up on people who are either self-employed or own a small business. You may be asked to bring a list of items to a local IRS office, or you may be asked to stop by the IRS and explain your entire return.
  3. A field audit is the most comprehensive type of audit. In these cases, an IRS agent will come to your home or place of business to physically examine items deducted on your tax return.

4 Keys to Surviving a Tax Audit

In many cases, you should seek the assistance of someone who has completed either a traditional or online graduate tax program. Also, while you go through the process, keep these four keys to surviving an audit in mind.

Educate Yourself

The National Small Business Association suggests you prepare for your audit by reading IRS Publication 1, entitled “Your Rights as a Taxpayer.” Additionally, obtain a copy of Publication 556, “Examination of Returns, Appeal Rights and Claims for Refund.” Read any additional IRS publications that explain the specific tax issue that the agent wants to discuss.

You may know that the IRS wants to audit you because you’ve failed to pay the taxes that you owe. Navigate to the IRS website and click on the “Payments” tab at the top of the page. You’ll see information about how to pay and what to do if you if you can’t pay. Use the information to come up with a payment proposal, and bring your payment proposal to your audit.

Bring Only Necessary Documents

Avoid providing information that the agent hasn’t specifically requested. For example, don’t bring documents related to prior years’ returns. If documents or receipts related to your audit are missing, then you have the right to reconstruct that information by talking to others. For example, if you made a donation to charity but lost the receipt, you can ask the charity for a copy.

When you correspond with the IRS, keep every document that you receive from the agency. Take notes during all of your meetings, and use those notes to formulate a letter to the IRS. Explain what was said during the meeting and any agreements that were made in the letter, and mail it to the IRS so that the letter is in your file.

Milk the Schedule

As a taxpayer, you have the right to schedule your audit at the time and place of your convenience. If you need additional time to prepare documents, request a delay. You can request a recess at any time during the meeting if you need to consult a tax professional.

Although you can stretch certain aspects of the schedule, do not fail to meet IRS deadlines. If the IRS requests a response from you within 30 days, then you need to respond. The smartest thing you can do is either to respond immediately or give the correspondence to your tax professional. Avoid setting the correspondence in a drawer and forgetting about it.

Say Only What Is Required

Giving away too much information during an audit is not in your self-interest, but withholding information from the IRS will make matters worse. If you’ve made a mistake on your tax return for a certain year, then admit the mistake, but don’t volunteer information if you’ve made the same mistake during other years.

You have the right to limit the discussion and the scope of your audit to the issue brought forth by the IRS. However, remember to treat the agent with respect. Avoid speaking disrespectfully, and control your emotions. If the auditor mentions fraud at any time, then talk to a tax professional.

An IRS audit can seem both scary and highly inconvenient. Since noncompliance is unwise, you should cooperate with the agency. Remember your rights, and be honest without volunteering non-essential information. If you have any questions at all, consult a tax professional.

About the Author: Steven Harris is a tax professional who has published a number of articles and blogs related to income tax. He’s also an audit survivor.

Do You Know What Forex Trading Is?

If I would walk around downtown tomorrow and I asked random people the question, “What is Forex Trading?” How many of them do you think would have any clue what I was talking about? If I had to throw out a percentage, I would say that maybe 10% would have a general idea what forex trading is, and that guess might actually be on the high side.

If you don’t know what forex trading is, don’t feel bad. It’s not a term that you hear every day. Even if you watch a news channel on investing once in a while, you still might not have picked up on the term. The concept is actually very simple. In the world today, there are many different currencies in use. Sometimes our dollar becomes stronger vs. other currencies and sometimes it’s weaker. In other words, if we take our cash over to another country after our currency has weakened, that means that we can buy fewer goods with that same amount of money than we could have yesterday. Forex trading is merely the purchase of currencies against one another with the expectation that the currency will strengthen, which will then make your investment worth more money.

This, of course, is a very generalized explanation of forex trading, but it you’re interested in learning more details, it might serve you well to take a look at some forex guides. With these guides, you’ll not only get a more in depth understanding, but you may even decide to invest in some forex trades yourself.

Long Term Investing vs. Short Term

What do you think of when you think of long-term investments? Probably a 401(k) or a Roth IRA right? Let me ask you this. How exciting is it to invest in these retirement funds each month? It’s pretty dull isn’t it? Sure, they might increase 15% over the course of the year, which is excellent, but it still feels like your investments are rising extremely slowly in the first 10 years. Only in the later years do you earnings really start to gain momentum and get a little more exciting.

If you’re not a fan of being bored (and I don’t think any of us are), then perhaps you’d like to spice up your life with a faster paced investment in the short term. You could invest in individual small cap stocks or junk bonds and have a chance to make a killing, but these are often quite difficult to predict. With the forex market, there is often quite a wide variety of stories that contribute to the rise and fall of each currency. And, if you can sniff out the right story at the right time, you could set yourself up for some immediate earnings. As will any short term investment, there is definitely more risk, so make sure you ease your way into this investment type. Start slow and as you begin to learn the process, then you can start to make larger trades.

How to Calculate Breakeven Point?

People run business mainly to make profits and till the money which has been invested in the capital is got back whatever money that is earned till that point of time cannot be called as a profit. To calculate the point at which the investment is got back is known as the break-even point and any product sold from this point contributes towards to profit and not selling contributes to loss.

How to Calculate Breakeven Point

There are many online tools available to calculate breakeven point but before that the parameters involved should be known and then people can easily understand how to calculate breakeven point. Fixed costs and variable costs are the two main parameters involved in investment, where fixed cost is the initial investment towards business setup and variable cost is the working capital or operational expenses involved towards making each product and this happens only when a product is made.

For break even, when the money towards fixed cost is obtained through business earnings the breakeven point is attained, as for income obtained for each product manufactured and sold therefore shall contribute to profit alone.