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No one wants to be embroiled in a tax dispute. Regardless of how confident you feel in your tax positions, you don’t want the time, expense and aggravation of an audit even if you can substantiate everything. However, a certain percentage of tax returns will most likely be examined whether the returns are for income tax, payroll tax, gross receipts, excise, sales and use tax. These tips can help reduce unnecessary woes from the IRS. * Maintain Sound Records One may be under the impression that records need to be maintained only in the case of audits. But in reality, the maintenance of good records can keep you out of trouble in the first place. While most audits are by correspondence, deductions might be disallowed unless you produce records substantiating them. To ensure that one is capable to respond quickly and thoroughly, maintain records and be prepared. * Respect Those 1099s It is a known fact that much of what the IRS does is information return matching, the endless correlation of taxpayer identification numbers and payments. The slightest mismatches can set off bigger problems. There are various Forms 1099 for miscellaneous income, interest, and many other payments and it is necessary to have a system to record and track Forms 1099, and that is precisely what the IRS does. How you handle them year round matters. It is important not to just keep them safe, but actually look at them to know if there is an incorrect form received. It is quite common to receive an incorrect Form 1099, and if you do receive one, contact the payer that issued it, explain the error and ask if they have already sent a copy to the IRS. Alternatively, ask them to destroy it and issue a correct one. It is necessary to ensure that every income item is matched up, every claimed deduction is approved. * Segregate business and personal expenses You may do things with a dual motive like a pleasant lunch with a business colleague, or buy a vacation home you also intend as an investment. But these are likely areas of tax disputes. Dealing with taxes will become much simpler when you keep away from passing off personal into business, including deducting the cost of your divorce because your business is at risk; Deducting a vacation with a client; or claiming your hobby was really for profit. We rush to our tax consultants for guidance on how to save the maximum amount of tax. Anyone with an income has to pay a tax, and everyone wants to do it hassle-free. Taking advice from the professionals can not only help you stay off the IRS radar, but also help save one from paying extra taxes. A professional tax consultant will give you the necessary support and guidance in all your tax planning issues and help in the areas of overseas voluntary disclosure as well. Read More About: Foreign Bank Account, FBAR, IRS Amnesty, 1031
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