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.
- A correspondence audit is conducted through the mail. The IRS is probably asking for specific documentation of a certain item on your tax return.
- 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.
- 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.
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.
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.
Probably summer is such a season we all have been waiting for. And many of us plan vacations, entertainments and just want to have a good time. But there’s still a need to pay bills and manage expenses. How to get all the things done this summer and stay on a budget? Here are some easy tips which will help you to save money during the summer season.
When it’s hot outside many people turn on their air conditioners and try to stay away from the heat. But to save money and energy it’s worth to limit usage of your air conditioner. Use it only when it’s necessary, for example when it’s the hottest time of the day. When you’re relaxing and watching TV you can use a fan instead of AC because if you’re not active probably you don’t feel the heat so much. Turn it off when you don’t need it or when you’re leaving the house.
Cut Back Unnecessary Spending
In summer we like spending time outside and often buy cold water and ice coffee. Also many people like eating outside in a company of their friends. Count how much money you spend on such small things. Before going out take a bottle of water from home and avoid unnecessary spending. Don’t eat outside too often, better cook at home and invite your friends for a summer party in the yard.
Don’t Put All the Expenses on Plastic
Try to pay with cash to avoid a credit card debt. Some people put their expenses on plastic and then complain that they can’t get out of debt. Probably you think that nothing bad will happen in case you will buy a new swimsuit and will pay with the card. But think twice if it’s a necessary purchase and you can afford it. Use other financial options like payday loans online or money advances only if you’re in emergency. In summer season we all have some additional expenses but try to be frugal and make up a spending plan to stay on a budget.
Save Money for Vacation
It’s better to start planning your vacation already in winter or in spring because then you will have more time for saving money. In case you will spontaneously decide to go somewhere for rest then there’s a risk that you will get in debt to finance your trip. That’s why it’s important to practice financial planning and try to foresee your expenses. Also be realistic about an amount of money you can spend on a vacation. It’s not worth to choose an expensive resort and take out a loan to afford it. Time will pass really quickly, you will get back home with the debt and then it will be necessary to think how to find a space in your budget to pay it off.
It doesn’t matter whether it’s winter or summer, it’s still necessary to control your finances and use money saving tips to be happy with your financial life during all year.
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.
There are many online tools available to calculate break even point but before that the parameters involved should be known and then people can easily understand how to calculate break even 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 break even point is attained, as for income obtained for each product manufactured and sold therefore shall contribute to profit alone.
Raising money for a good cause is a great thing, but people won’t know about it unless they are told. If they don’t know what you’re doing, they won’t be as excited about donating money. This is why it’s important that you have a way to deliver information to your target audience for your fundraiser. A marketing committee communicates what an organization does to help the community. Ensuring that there is a good communication between the organization and marketing committee is important for the following reasons.
Fundraising communications between an organization and marketing committee will ensure that the public understands the cause. When people understand the good that an organization is doing, they will be more likely to want to find out more, and tell other people.
Helps Create Effective Fundraising Programs
When the organization’s mission is clear, the fundraising team can come up with programs that help achieve goals. The marketing committee communicates how the fundraiser will achieve the goals to the public. This clear message is what makes many people trust and feel good about donating.
Establishes a Brand Identity
Organizations often receive donations from past donors. The ones that have a better chance of receiving repeat donations are those that have established a brand identity. They have a clear message about their cause, and that comes from the good communication across the organization. Repeat donors aren’t hearing one thing and then another. They are confident in donating because they know exactly what their money will be used for by the organization.
Includes a Call to Action
People must be told what to do after they hear about what your organization is doing for the community. It’s important this call to action is communicated, or many people won’t have the urge to donate.
By having good communication between an organization and public, fundraisers are much more likely to be successful. Start practicing effective communication by discussing the points here with your fundraising and marketing teams today.