It is that time of year again. Traditionally this is the time of year when all Americans become spineless jellyfish, fearful that if they make a fifty cent mistake on their income taxes the IRS will bear down on them like a run away 18 wheeler on a 10% down hill.
FEAR NOT.
First, you probably won't make a mistake.
Second, if you do you will probably just get a letter from the IRS telling you about it and requiring you pay any additional taxes. If the mistake is in their favor they will tell you that too. You might have to file an amended return but that's easy. If you have already received your refund, you might have to return some of it. If there is a penalty you can ask that it be waived and if it was just a mistake the IRS will usually grant your request.
Third, It is highly unlikely that you will be subjected to an audit, but if you are two things....1. do not give the IRS permission to come to your home to conduct the audit - go to them. 2. do not take any documentation with you that they do not specifically tell you to bring. If they are questioning (for instance) a medical deduction, take only information concerning the medical deduction. If they decide they want to see something else tell them you don't have it and you'll need to schedule another appointment. Answer their questions as honestly as you can but do not volunteer any information they don't ask for. Anything you have with you and anything you say is fair game.
Better yet, particularily if there are some iffy things on your return, hire a rep to go for you and only give them the information the IRS asks for.
Forth, If you get a letter and the IRS is wrong, don't be concerned about telling them they're wrong. I have had a number of letters and except for a couple of arithmetic errors (before the computer days) they have always been wrong. This can be especially true if you move money from one retirement account to another...I had notice one year where they picked up that I had closed and IRA but not that I had rolled the money into another IRA the same day....so their are sometimes gaps in the information.
Fifth, the IRS is not likely to charge you with fraud which is a felony. When they charge you with fraud the burden of proof shifts from you to them and you can get access to all of the information they have. Hence, they rarely charge anyone with fraud.
Sixth, when doing your taxes, you are entitled to reduce your taxes owed to the minimum so take advantage of everything you are allowed. It is also perfectly ok to interpret all things in your favor unless you are given specifics on how to calculate a given deduction or bit of income.
Seventh, always caculate both your itemized deductions and the standard deduction and claim the highest. I don't know how many taxes I did where people would want to claim standard but easily qualified for itemized. And, a few times it went the other way where their situation had changed and itemized no longer was best for them.
Eighth, If you have a small sideline business of selling a few pens now and then. If you honestly report any profit from it the IRS is not likely to question it regardless of how you do it. We can spend days arguing about how to report certain things and whether or not you have a business or hobby but in the end the IRS is more interested in getting the appropriate tax than how you arrive at the numbers. Be honest, but don't lose sleep over how to keep track of expenses for 10 or 15 pens a year.
Ninth, Wait to file until you have received all of the information from banks, paypal, mortgage companies, churchs etc. It's a pain in the neck when the IRS gets a 1099 that was sent out late and hold up your refund or adds to your tax bill because you forgot it.
Tenth, DO NOT LOSE ANY SLEEP WORRYING...IF YOUR CONSCIENCE IS CLEAR THERE IS NOTHING TO WORRY ABOUT.
FEAR NOT.
First, you probably won't make a mistake.
Second, if you do you will probably just get a letter from the IRS telling you about it and requiring you pay any additional taxes. If the mistake is in their favor they will tell you that too. You might have to file an amended return but that's easy. If you have already received your refund, you might have to return some of it. If there is a penalty you can ask that it be waived and if it was just a mistake the IRS will usually grant your request.
Third, It is highly unlikely that you will be subjected to an audit, but if you are two things....1. do not give the IRS permission to come to your home to conduct the audit - go to them. 2. do not take any documentation with you that they do not specifically tell you to bring. If they are questioning (for instance) a medical deduction, take only information concerning the medical deduction. If they decide they want to see something else tell them you don't have it and you'll need to schedule another appointment. Answer their questions as honestly as you can but do not volunteer any information they don't ask for. Anything you have with you and anything you say is fair game.
Better yet, particularily if there are some iffy things on your return, hire a rep to go for you and only give them the information the IRS asks for.
Forth, If you get a letter and the IRS is wrong, don't be concerned about telling them they're wrong. I have had a number of letters and except for a couple of arithmetic errors (before the computer days) they have always been wrong. This can be especially true if you move money from one retirement account to another...I had notice one year where they picked up that I had closed and IRA but not that I had rolled the money into another IRA the same day....so their are sometimes gaps in the information.
Fifth, the IRS is not likely to charge you with fraud which is a felony. When they charge you with fraud the burden of proof shifts from you to them and you can get access to all of the information they have. Hence, they rarely charge anyone with fraud.
Sixth, when doing your taxes, you are entitled to reduce your taxes owed to the minimum so take advantage of everything you are allowed. It is also perfectly ok to interpret all things in your favor unless you are given specifics on how to calculate a given deduction or bit of income.
Seventh, always caculate both your itemized deductions and the standard deduction and claim the highest. I don't know how many taxes I did where people would want to claim standard but easily qualified for itemized. And, a few times it went the other way where their situation had changed and itemized no longer was best for them.
Eighth, If you have a small sideline business of selling a few pens now and then. If you honestly report any profit from it the IRS is not likely to question it regardless of how you do it. We can spend days arguing about how to report certain things and whether or not you have a business or hobby but in the end the IRS is more interested in getting the appropriate tax than how you arrive at the numbers. Be honest, but don't lose sleep over how to keep track of expenses for 10 or 15 pens a year.
Ninth, Wait to file until you have received all of the information from banks, paypal, mortgage companies, churchs etc. It's a pain in the neck when the IRS gets a 1099 that was sent out late and hold up your refund or adds to your tax bill because you forgot it.
Tenth, DO NOT LOSE ANY SLEEP WORRYING...IF YOUR CONSCIENCE IS CLEAR THERE IS NOTHING TO WORRY ABOUT.
