Just Left a Face to Face IRS Audit

downloadToday I met with a friend and the IRS for a face to face audit of his 2011 personal and business taxes. The audit was at the IRS offices located at 290 Broadway in NYC. The meeting started at 11 am and ended at 1:30 pm. Again, he runs a business and they wanted an explanation of his business and his business expenses.

Here are the important takeaways from the audit:

* Don’t Panic

IRS employees are people too. Ours was pleasant and professional. She lives in Brooklyn, sends her son to a charter school and loves to garden. She even shared her skittles.

Her office neighbor’s ringtone of Lil Jon and Usher was pure comedy.https://www.youtube.com/watch?v=GxBSyx85Kp8

* KEEP ALL YOUR RECEIPTS/INVOICES/CANCELLED CHECKS

That is the most important take away. The more receipts/invoices/cancelled checks you have, the less you need to worry about an audit (They don’t want bank statements).

This also goes for people who itemized deductions on Schedule A for charities and medical expenses.

* Be Organized

The more organized you are, the faster everything goes and the easier the process. Software is helpful in explaining expenses but receipts are what they really want. Scanners and folders are worth the investment.

* Be able to explain your business in detail

The IRS wants to make sure the expenses you claim make sense for the business.

* Respond to an audit as soon as possible

Again, having the receipts makes the process so much easier.

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An Excerpt from TaxAssurances’ Book for Small Business

sales-taxAlong with worrying about paying federal, state and local taxes, many business owners have to worry about paying sales taxes on the products and services they offer to the public. Sales taxes are a tax on the retail sales of certain tangible personal property and services.

Potential and new business owners should reach out to their state and local revenue departments to see if the business they are starting is responsible for collecting, reporting and paying sales taxes to them. Along with those requirements, they can also find out what the tax rate is that they need to collect.

In the state of New York, the sellers of the following goods and services need to worry about paying sales tax. Again, potential business owners should check with their state and local revenue departments to find out if they are responsible for accepting, reporting and paying sales taxes.

• Tangible personal property (unless specifically exempt);
• Gas, electricity, refrigeration and steam, and telephone service;
• Selected services;
• Food and beverages sold by restaurants, taverns, and caterers;
• Hotel occupancy; and
• Certain admission charges and dues.

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Top 10 Tips to Know if You Get a Letter from the IRS

irs-building1Here are the top 10 tips you want to know if you get a letter from the IRS directly from the IRS:

The IRS mails millions of notices and letters to taxpayers each year. There are a variety of reasons why we might send you a notice. Here are the top 10 tips to know in case you get one.

1. Don’t panic. You often can take care of a notice simply by responding to it.

2. An IRS notice typically will be about your federal tax return or tax account. It will be about a specific issue, such as changes to your account. It may ask you for more information. It could also explain that you owe tax and that you need to pay the amount that is due.

3. Each notice has specific instructions, so read it carefully. It will tell you what you need to do.

4. You may get a notice that states the IRS has made a change or correction to your tax return. If you do, review the information and compare it with your original return.

5. If you agree with the notice, you usually don’t need to reply unless it gives you other instructions or you need to make a payment.

6. If you do not agree with the notice, it’s important for you to respond. You should write a letter to explain why you disagree. Include any information and documents you want the IRS to consider. Mail your reply with the bottom tear-off portion of the notice. Send it to the address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

7. You won’t need to call the IRS or visit an IRS office for most notices. If you do have questions, call the phone number in the upper right-hand corner of the notice. Have a copy of your tax return and the notice with you when you call. This will help the IRS answer your questions.

8. Always keep copies of any notices you receive with your other tax records.

9. Be alert for tax scams. The IRS sends letters and notices by mail. The IRS does not contact people by email or social media to ask for personal or financial information.

10. For more on this topic visit IRS.gov. Click on the link ‘Responding to a Notice’ at the bottom left of the home page. Also, see Publication 594, The IRS Collection Process. You can get it on IRS.gov/forms at any time.

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