How to Find a Good Tax Lawyer

When looking for tax relief, how to find a good tax lawyer is critical.

Tax law is complicated and highly technical. In the legal world, the field of tax law is considered one of the more demanding specialties. Tax lawyers deal with a wide range of situations and the rules and laws are continually changing. Not only does a tax lawyer need to have superlative legal skills to succeed, they also need certain personality traits. Find a good tax attorney to help you with tax relief and avoid dealing with the IRS directly.

What qualities make a good attorney?

Consider these academic and professional guidelines for tax attorneys when looking for tax relief.

  • A good tax attorney has specific experience in the field of taxation. For example, are your tax issues related to a real estate transaction? Or are you running a business and need assistance with a sales tax challenge? Or with filing your income tax? A good tax lawyer will concentrate within certain fields and will be familiar with the laws and the protocols needed to address those particular areas of tax relief.
  • Being associated with an office that is exclusively focused on tax related matters is another important quality for a tax attorney.
  • Having an LLM (Masters Legal Degree in Law) in taxation is a sign that your attorney is serious about his profession and is academically qualified to work within the field of tax law.
  • A good tax lawyer has firsthand experience working with the IRS.
  • Successful tax attorneys are continually refreshing their knowledge and keeping up with the continually changing nature of tax law.
  • Tax lawyers should be in good standing with the Better Business Bureau and their local state bar.
  • Good tax attorneys keep their clients informed and up-to-date during the tax relief process.

Skills of a Good Tax Lawyer

Tax attorneys also need to have certain personal skills and abilities to succeed in the area of tax relief. Consider these skills when finding a tax lawyer.

  • A good tax lawyer has high level oral communication skills. They are the intermediary between you and the tax authorities. They need to be able to explain complicated issues and represent your case in a clear manner.
  • Above average written communication skills are another important qualification of a good tax attorney. Tax lawyers write complaints, documents and lawsuit responses.
  • Critical thinking skills are necessary when your attorney is working on a tax relief case. A good tax lawyer can take a look at a case, pick up on any weaknesses, and choose which course of action to take based on the specifics of the case.
  • Having an analytical and organized personality is highly important for a tax attorney. Tax relief cases are usually very complicated and involve numbers and specific, detailed information. A good tax attorney will be able to stay on top of all the elements of the case.
  • Good interpersonal skills are critical for a tax attorney to work effectively with a client in a tax relief case. They need to be able to communicate effectively with both the client and with the tax authorities.
  • Having a committed and persevering personality are necessary qualities for the person who will be representing your tax relief case.

Taxes are complicated and the laws are constantly changing. Your financial future is often at stake in a legal situation involving taxes. Getting appropriate representation for tax relief is very important and knowing what makes a good tax lawyer is a very important first step in getting a resolution.

Need some tax relief? Solutions start here. Learn about tax reduction strategies with Optima Tax Relief. Contact us for a tax consultation today.

What does it mean to get audited?

Back in the day, the word “audit” conjured up widespread fear and loathing. With an astonishing 5.6 percent of all Americans receiving that dreaded audit notice from the Internal Revenue Service in 1963, nearly everyone knew someone who had been subjected to a tax audit. The number of IRS audits has declined sharply since then, with a 23 percent decline in the past twenty years. Nonetheless, the IRS has not completely pulled the plug on audits, although budget cuts has precipitated a shift from all-encompassing in-person audits in favor of less cumbersome, less costly audits that focus on specific tax issues.

Five Reasons for an IRS Audit

So, why would a person or business get audited? Here are some of the reasons you may be audited by the IRS.

  1. Failing to report income
  2. Claiming too much in charitable donations
  3. Claiming too many business expenses
  4. Claiming a loss for a “hobby” activity
  5. Making errors on your return

Tax Return Errors

The vast majority of audits are related to items on tax returns that trigger red flags, such as math errors, inconsistencies between W-2 and 1099 forms.

Unusual Increases or Decreases in Income

Another common red flag is a return that shows a reported income or income far out of line with earnings from previous years.

Associated Transactions

You may also be audited if your tax return reflects transactions with another taxpayer who is being audited.

Above Average Withholding

Automatic red flags such as above average withholding for your income level may also trigger an audit.

Random Audits

A certain number of audits are the result of plain bad luck – returns chosen at random.

How Do You Know If the IRS Is Auditing You? The letter informing you that you are being audited should include a notice number in the right-hand corner. This notice number will indicate the reason for the audit. You should use this notice as a guide to determine which records you should gather. Scams are unfortunately common, so it’s important to understand the process. Learn more about the audit notification process in our blog: How to Know If The IRS Is Auditing You.

The Types of Audits

The audit notification letter you receive should also indicate what type of IRS audit you have been selected for. Depending on the type of audit you are facing, your tax matters could be settled in a matter of days or linger for months. For more involved audits, obtaining the services of a tax professional is highly advisable. Consider the following types of audits to better understand what it means to get audited.

Correspondence Audit

A correspondence audit is conducted by mail. Correspondence audits usually involve tax matters that are relatively easy to resolve. In most instances the IRS is seeking copies of checks, receipts and other documentation to support deductions or credits that you have claimed, or to clarify other items on your tax return.

Office Audit

An office audit is conducted in person at your local IRS office. You should be prepared to report to the office with copies of the requested documentation. You may also have a legal representative or your tax preparer present during the audit.

Field Audit

Like an office audit, a field audit is also conducted in person. Unlike an office audit, a field audit is conducted in your place of business. You should be prepared to present copies of your documentation at the audit, and your legal representative or tax professional should also be present. You are not obliged to allow IRS personnel into your home unless the agency has obtained a court order. If you claim the home office deduction, agents may request to enter your home; if you refuse the request, your deduction will almost certainly be disallowed.

Taxpayer Compliance Measurement Program Audit

The IRS uses Taxpayer Compliance Measurement Program (TCMP) audits to update the data it uses to write it computer scoring program. This is the most extensive type of audit, which examines every aspect of your tax return. If you receive notice of a TCMP audit, you should be prepared to present exhaustive documentation, including birth and marriage certificates.

Can You Go to Jail for an IRS Audit?

While an audit may require significant effort on your part to gather the documentation required, it should not inspire panic. The unofficial threshold set by the IRS for tax fraud is at least $70,000 in unlawfully uncollected taxes and at least three years of fraudulent conduct. Therefore, while the odds are stacked against you in terms of escaping without additional tax obligations, it is extremely unlikely that as an honest taxpayer, you will face criminal charges or jail time as a result of an audit.

Learn more about tax fraud and how it happens with Optima Tax Relief. If you need tax help, contact us for a free consultation.

Would You Cheat on Your Taxes?

Would you cheat on your taxes? If you said “no,” count yourself in the majority of people who wouldn’t commit tax fraud.

According to the Taxpayer Attitude Survey, about 87% of American Taxpayers say that it is not acceptible to cheat on taxes, while more than 95% agree that it is every American’s civic duty to pay their fair share of taxes. In addition, 91% of those surveyed agreed that everyone who cheats on their taxes should be held accountable.

Think that if you look honest, you can get away with fudging your taxes? Think again.

However, actual revenues collected by the Internal Revenue Service tell a somewhat different story. The so-called “tax gap” is defined as the difference between the total income tax liability and the amount of income tax payments that are made voluntarily and on a timely basis. This tax gap totaled $450 billion in 2008 but shrank to $385 billion after late payments were posted.

Taxpayers across the country under-reported their income by an estimated $376 billion the same year, while underpayments amounted to $46 billion, and $28 billion was owed by non-filers – people who did not complete tax returns at all. All told, the compliance rate in 2008 on the estimated $2.66 trillion tax obligation was about 83 percent.

Under-reporting Income to the IRS

Most taxpayers are diligent about paying taxes on income reported on W-2 forms. After all, the IRS receives the same information, so skipping out on paying what is owed is fairly difficult. Self-employed workers who receive 1099 forms have somewhat more latitude about how much total income they report due to legitimate business-related expenses. Nonetheless, earnings listed on 1099 forms are also reported to the IRS; therefore, most self-employed workers at least acknowledge those earnings.

On the other hand, a significant amount of cash income is never reported to the IRS. If you were paid $100 to fix someone’s computer, you will probably get by with not reporting that income. However, if you collect a cool $5,000 on the side through your online storefront, you shouldn’t expect to fly under the IRS radar if you don’t acknowledge the sum on the following year’s tax return.

Questionable Tax Deductions

There is nothing wrong with claiming every penny to which you are entitled through legitimate tax credits and deductions. This is not regarded as cheating on your taxes. If you are self-employed and you have established an authentic home office, you should absolutely claim the home office deduction. If you are a wage earner whose boss expects you to call on out-of-town clients on your own dime, go ahead and claim the deduction for work-related travel. As long as you can document your claim, you won’t be accused of tax fraud – even if you are audited by the IRS.

On the other hand, taking a vacation in Hawaii and claiming a deduction because you attended a seminar during the trip likely won’t pass muster with the IRS. Likewise, the cost of your daily commute from your home to your cubicle is also unlikely to be deductible. If you have doubts about whether a deduction or credit is legitimate, it’s best to check with a tax attorney or with a certified public accountant to avoid being accused of cheating on your taxes.

Discredited Tax Protests

A persistent movement exists among a small group of individuals who claim that federal income taxes are unconstitutional because the Sixteenth Amendment to the Constitution (which was ratified in 1913) was improperly ratified. These tax protesters insist that they are exempt from paying income taxes as a result. The IRS has repeatedly dismissed such claims, frequently charging delinquent taxpayers with filing frivolous returns.

One of the more prominent figures snagged for adhering to discredited tax protester claims is actor Wesley Snipes. Snipes was released from federal prison in 2013 after serving nearly three years for misdemeanor charges related to willfully failing to file tax returns. Snipes claimed that he was misled into believing that his actions were legal by his co-defendants, tax-protesters Eddie Kahn and Douglas Rosile. Federal prosecutors had also pursued felony charges against the three for tax fraud and conspiracy, alleging that Snipes had shipped more than $15 million overseas in an illegal bid to avoid paying taxes. Kahn and Rosile were convicted of those charges, but Snipes was acquitted.

Straight-Up Tax Scams

While the actions described above can be described as questionable claims and gray-area tax-related behavior by otherwise honest citizens, straight up tax evasion scams are also prevalent. Such tactics as strictly paying employees in cash and setting up questionable business and family trusts are among the more common tax evasion schemes attempted by both individuals and companies attempting to skirt paying income taxes.

While a case can sometimes be made for leniency concerning unwitting tax evasion, the IRS frequently takes a dim view of defendants that in its view have deliberately attempted to commit fraud. Outright scams, once uncovered by the IRS, are likely to result in criminal tax evasion charges and long prison sentences upon conviction. This contrasts with civil tax evasion, which can carry hefty fines but no jail time.

What is the Penalty for Cheating on Your Taxes?

Even if you get away with underpaying your taxes (or failing to file returns at all) for a short period, the odds are good that you will be caught eventually. The statute of limitations for federal tax audits is doubled from three to six years if you fail to report at least 25 percent of your income, or if you have income on undisclosed foreign assets that totals $5,000 or more. There is no statute of limitations on IRS audits for filing fraudulent returns or unlawfully failing to file tax returns, which means that you could be looking over your shoulder for years – or even the rest of your life.

Optima Tax Relief offers a range of tax relief services to help you prepare your taxes. Schedule a tax consultation with one of our licensed professionals today to discover how we can help you.

What is the Minimum Income to File Taxes?

Do I Need to File a Federal Tax Return?

More than 43% of Americans don’t have to file a federal tax return. Are you one of them?

While the IRS expects to receive more than 150 million tax returns this year, it is estimated that nearly 43% of Americans don’t have to file a federal tax return according to the IRS.

So how are millions of Americans avoiding this tedious task? Is there minimum income to file taxes?

Do I Need to Pay Federal Income Taxes?

The recent recession had a lot to do with the fact that nearly half the country is off the hook when it comes to filing a tax return. Many people faced a drastic reduction in their earned income, and now simply do not make enough money to meet the minimum requirements to file. Additionally, President Obama teamed up with Congress to boost existing credits and create new stimulus measures which have resulted in many people qualifying for tax benefits and credits which eliminate their tax obligation entirely.

What is the Minimum Income to File Taxes?

There is a minimum income to file taxes. If you are age 64 or younger, filing as single and earned more than $10,000.00 in 2013 ($11,500.00 if age 65 or older), then you are among those who have to file a tax return with the IRS this year. If you were married at the end of 2013 and you plan on filing separate returns, you must file if you earned more than $3,900.00 in 2013.

* Is there a minimum income to file taxes for children?

These days there are more and more children working each year, oftentimes earning enough throughout the year to require that they file a return as well. This can be a complicated matter when trying to decide if the child should file a return and how that could affect their parents claiming them as dependents on their own return. Basically, a child must file a tax return if their earned income was over $6,100, however parents are still able to claim these children as dependents on their tax return if the child lived with them.

Even if you’re not required to file…

One important thing to consider is even if you are not required to file a federal tax return for 2013, you may want to still file a return as it may result in a refund owed to you. If you had income tax withheld from your paycheck or if you qualify for the EITC, additional child tax credit, health coverage tax credit, or refundable American opportunity education credit, filing a return will most likely result in the IRS sending you a refund check.

A major tax credit that helps Americans reduce their tax liability is the Earned Income Tax Credit (EITC). The EITC was originally approved by Congress in 1975 to help working Americans (with a low to moderate income level) keep more of what they earned. According to the TPC, about 1 in 5 tax returns (close to 28 million) that were filed in 2010 claimed the EITC, resulting in over 60 million dollars in credit to Americans. For the 2013 tax year, working families with children that have annual incomes below $37,870 to $51,567 (depending on number of children) will be eligible for the federal EITC, as well as those without children that have incomes below $14,340.

According to the IRS, about three out of four people who file a tax return this year will receive a refund. Last year taxpayers received an average refund of $2,744, and the IRS is typically able to process that refund within 3 weeks. To get your refund from the IRS the quickest, be sure to e-file your tax return and opt for direct depositing your refund into your bank account.

Filing your annual income tax return can be a complicated and tedious task, but there are many benefits and credits available now to help reduce or even eliminate your tax liability. Even if you are not required to file a return, these tax credits can result in an unexpected refund from Uncle Sam. However, you have to file the return to receive the cash, so be sure to explore all of the available credits and deductions when preparing your return this year.

Need some help filing taxes? Optima Tax Relief offers tax consultation.

The Tax Mistake That Cost Me Thousands

Via LearnVest By Cheryl Lock ~

A tax mistake could cost you thousands. When my pay was direct-deposited into my checking account every two weeks while I was working my first full-time freelance job, I’d think, “Wow, that’s a decent amount of money. I can totally live off this!”

No one ever told me (and I never bothered to ask) why my paycheck seemed so large, so I lived it up for an entire year—eating out, going to plays, buying new clothes and taking trips. Then April rolled around: tax time. In all fairness, I knew that I hadn’t been paying freelance taxes on the money I was making as a freelancer. I just had no idea how much I actually should have been setting aside from each paycheck. I now know that I should have been saving at least 33% to 35% of every paycheck to put toward taxes. Hindsight … you know what they say.

In the end, I owed a little over $3,000. My accountant practically cried when she gave me the news—and a full-blown panic attack.

Well, it turns out that I’m not the only one befuddled by taxes—especially now that the new tax rules have been put in place.

Another Tax Mistake – a $40K Tax Mistake

In 2010, Heidi Saucedo’s husband was working in Egypt for two months. While he was away, Saucedo received an envelope from the IRS, which revealed a bill for $40,000.

“After I picked myself up off the floor, I had to contact the hubby … by Facebook chat,” she says. “Can you imagine going through all the back-and-forth required for that via chat?”

The problem was that Heidi and her husband had not filed a tax return in five years since money was tight while she stayed home with their two children. “I just didn’t understand that we could possibly owe nothing—I thought we would be charged for everything we owned,” Saucedo says. “I knew this was foolish, but we were living paycheck to paycheck, and we were too proud to ask for assistance.”

Her husband was also working under a 1099—meaning that he wasn’t a full-time employee, so he was taxed at the end of the year instead of out of every paycheck. “Apparently, I had ‘known’ this (my husband says that we discussed it), but to this day, I swear I had no clue,” Saucedo says.

After using TurboTax to figure out the tax deductions that hadn’t been included in that $40,000 bill (like standard deductions and the child tax credit), it turned out that they didn’t owe anything. “At the time, I chose not to go to a professional since the gist of the letter from the IRS was that all we needed to do was file our taxes,” Saucedo says. “I was pretty overwhelmed, and I didn’t have any money to pay a CPA, so I signed up for TurboTax.”

“The good thing was that when I began the search for anything and everything that I could get my hands on to rectify the situation,” Saucedo adds, “I realized that I love doing taxes. Never again will there be an unfiled return!”

LearnVest is the leading lifestyle and personal finance website for women.

The post The Tax Mistake That Cost Me Thousands appeared first on SuperMoney!. Need a tax attorney? Find one today with Optima Tax Relief.

IRS Fresh Start Program: How It Can Help with Your Tax Problems

The IRS Fresh Start Program Initiative, first announced, February, 2011, has had one goal: to make it easier for individuals and businesses to pay their back taxes and penalties. The Initiative has been expanded since then, but still holds true to its original purpose. How exactly will it affect you if you’re struggling to pay taxes? Here are the four components that Fresh Start Program has changed for your benefit.

What Is the IRS Fresh Start Program?

The IRS Fresh Start Program is a tax relief program that is designed to allow taxpayers to pay off substantial tax debts affordably over time.

Back in the bad old days, the image of the IRS was one of intimidation. Whether deliberately cultivated or not, the IRS did little to dispel this perception. In recent years, the IRS has sought to reboot the way it interacts with taxpayers, with agents receiving training and instruction in how to assist taxpayers who are in arrears rather than torment them. The IRS Fresh Start program combines penalty relief, installment payments; lien releases and a program known as Offer in Compromise that allows some taxpayers to settle their federal tax debts for less than what they actually owe.

How the IRS Fresh Start Program help waive Tax penalties

Originally, when paying and filing your taxes, missing the tax filing deadline meant immediate interest charges and penalties. But with the Fresh Start Initiative, qualifying unemployed taxpayers can apply to have Failure-to-Pay penalties waived for six months. This means that individuals have until October 15th, 2020 to pay their 2019 taxes.

How do you qualify for the IRS Fresh Start Program?

To qualify for the Fresh Start Program, you must:

  • Have been unemployed or seen a decrease in income
  • Earn less than $100,000 a year individually
  • Earn less than $200,000 a year as a couple
  • Not have a large tax balance from the previous tax year
  • The IRS Fresh Start Tax Relief program was launched in 2012 to help taxpayers who were struggling from the effects of the ongoing financial crisis. The first aspect of the program provided some unemployed taxpayers with exemption from the failure-to-pay penalty. Under this initial slice of the Fresh Start Initiative, taxpayers received a six-month reprieve from penalties on taxes owed for their 2011 federal tax returns. Although interest was still applied to any unpaid taxes, penalties were suspended from April 17 to October 15, 2012.

    Easy Installment Agreements

    The IRS Fresh Start Program also raised the maximum tax owed for taxpayers from $25,000 to $50,000 to qualify for streamlined repayment plans. Under the streamlined installment payment agreement program, taxpayers may establish payment plans online through the Online Payment Agreement page located on the IRS website. Taxpayers who owe more than $50,000 may still establish installment agreements but must either file a Collection Information Statement (Form 433-A or Form 433-F) or make sufficient payments against their past-due tax balance to bring the total tax owed below the $50,000 threshold.

    How To Withdraw Notice Of Federal Tax Lien

    The Fresh Start Initiative raises the minimum threshold for filing an IRS Notice of Federal Tax Lien on taxes owed from $5,000 to $10,000. The new standard is not retroactive, and the IRS may still impose liens against taxpayers who owe less than $10,000 when the agency deems that circumstances warrant doing so. To request that the IRS withdraw the Notice of Federal Tax Lien against liens that have been released, taxpayers must file Form 12777 – Application for Withdrawal, available on the IRS website. When citing a reason for the request, taxpayers should check the last box which states “the taxpayer, or the Taxpayer Advocate acting on behalf of the taxpayer, believes withdrawal is in the best interest of the taxpayer and the government.”

    How To Make use of ‘Offer in Compromise’ and settle for less Tax

    An Offer in Compromise, according to the IRS Fresh Start Program allows taxpayers to settle their obligations to the IRS for less than the total amount owed. The IRS only allows taxpayers to obtain relief under the Offer in Compromise program in circumstances where requiring repaying the full back taxes owed would constitute an undue burden or in cases where taxpayers demonstrate that they will be unlikely ever to be able to pay the full amount owed. Traditionally, the IRS has been stingy about accepting Offer in Compromise proposals from taxpayers; as a result, very few taxpayers were able to qualify for the program.

    The IRS Fresh Start Initiative has established more flexible standards in evaluating the financial standpoint of taxpayers who request relief under an Offer in Compromise. As a result, more taxpayers may qualify. To be eligible for this IRS tax relief program under the Offer in Compromise program for grounds other than Doubt as to Liability, taxpayers must meet all of the following conditions.

    Requirements to qualify for the Offer In Compromise program:

    • Cannot have an open personal or business bankruptcy petition
    • All required tax forms must have been filed
    • All required tax payments for the current year must be paid
    • Business owners with employees must have made current quarterly tax payments

    An Offer in Compromise may be either for a single lump-sum payment or for installment payments. To request an Offer in Compromise, taxpayers must submit Form 433-A (OIC) for individuals or Form 433-B (OIC) for businesses along with either $205 to cover the application fee and either a payment of 20 percent of the proposed lump-sum payment or an amount equal to the first proposed monthly installment payment. Individuals and sole proprietors who qualify under Low Income Certification guidelines set by the IRS are exempted from paying the application fee.

    New Installment Guidelines according to Fresh Start Program

    Installment agreements allow a person to make monthly payments on their tax debt if they can’t afford to pay the total at once, and/or aren’t eligible for an Offer in Compromise. In the past, once an individual’s tax balance reached $25,000, the IRS began conducting a financial analysis of the person’s income and expenses to determine how much the taxpayer would pay per month. Additionally, a Notice of Federal Tax Liens was filed.

    Under Fresh Start, more taxpayers will be able to avoid this invasive process altogether, as the tax balance threshold has been raised to $50,000. At that point, once the installment agreement process is started, you’ll now have six years to pay the debt off. If you are considering entering an installment agreement, let us know and we’ll make sure you qualify.

    Notice of Federal Tax Liens and the Fresh Start Program

    If an individual fails to pay their tax debt the government can file a claim against that person’s property with a federal tax lien. “Property” includes everything an individual owns, including real estate, vehicles and financial assets. The Notice of Federal Tax Lien alerts creditors that the government has a legal right to a taxpayer’s property. This may limit your ability to get credit.

    Similar to installment agreements, FSI has raised the Notice of Federal Tax Lien filing threshold to $10,000 from $5,000. The IRS might still choose to file at an amount less than $10,000, but it’s not as automatic as before.

    How the IRS Fresh Start Program can help with your Tax problems

    While none of these alternatives represents an easy tax solution, each of them does provide a viable avenue for tax relief. If you have been struggling to pay your federal income tax burden, investigating possible assistance under the IRS Fresh Start Tax Relief program is definitely worth your while, either on your own or with the assistance of a tax professional. You may find that your overall tax burden is significantly reduced.

    Wondering if you’re eligible for the Fresh Start program? Give us a call.

    Do you need tax relief help? If you’re struggling with paying your taxes, don’t know how to fill out an Offer in Compromise or don’t know which forms to file, contact us today. We’ll help you take advantage of the Fresh Start Initiative, and deal with the IRS so you don’t have to.

    Get Tax Help

    Let Optima Tax Relief Help

    Our professionals will put your mind at ease.

    Get Tax Help

    How To Prepare For A Tax Audit

    So, you’ve done your taxes and alas, the IRS has sent you a letter that you are being audited. The walls are caving in, you’re having panic attacks, and can’t possibly fathom what are you going to do. Take a deep breath and read this article on how to prepare for a tax audit. Rest assured that you don’t need to be nervous. IRS audits are just trying to figure out if incomes and figures add up right; it simply inquires of your tax return. The IRS its self says that an audit is,” to determine if income, expenses, and credits are being reported accurately.” Follow these steps and be prepared.

    How do I handle an IRS audit?

    The first step to handling an IRS audit is reading and acknowledging the notification letter. Don’t ignore the IRS letter, even though it might seem easier and tempting to ignore bad news. Read it, read slow, and read it one more time.

    Check the letter is legitimate and actually notifying you of an audit. An IRS audit letter will come to you by certified mail, it will include personal information such as name, taxpayer ID, form number, employee ID number. Just because you receive a letter from the IRS doesn’t automatically mean you’re being audited.

    Read which year in question they are auditing, and what documents specifically the IRS are asking for. Prepare all the necessary returns and explanations for the representatives.

    Types of IRS Audits

    There are different types of IRS tax audits. These are:

    • Correspondence Audit
    • Office Audit/In-person Audit
    • Field Audit
    • Taxpayer Compliance Measurement Program Audit

    Preparing for an in-person audit

    There are steps you can take when preparing for an in-person interview. This is an interview where you physically have to be in the IRS office and speak with IRS employees. The IRS may question abnormally high deductions, and ask to see proof.

    Carefully prepare for this office audit by gathering the necessary returns and explanations that were requested in your IRS letter.

    Once in this audit, don’t say more than what is asked. Do not offer up any extra documents other than what you were asked to bring. The less you say the better, because saying more leads to more questions.

    It is important to know that you do have the right to have an attorney present if you feel that it is needed.

    Preparing for a correspondence audit

    A correspondence audit, also known as a mailed in audit, is usually just the IRS requesting additional information relating to your tax return, such as receipts or canceled checks. In many cases this audit is just asking you about a simple mistake that you can correct by mailing in all the correct documents. If you’ve read your letter carefully and provided the correct documents, then these audits can be simply resolved.

    Preparing for a field audit

    The last type of IRS audit is a field audit, where the IRS may actually come to your home or to your job. This can be scary but remember to breathe and don’t offer information if you aren’t fully prepared. Remember if you feel that you need an attorney or tax professional you can request to have the audit done in their office.

    Tips for preparing for an IRS audit

    Understand the issue

    To better prepare yourself for any of these types of tax audit, read up on the tax laws that are specific to the problem. Knowing this information will better prepare you for questions asked by the auditor and leave them more satisfied with your answers.

    Be polite & honest

    When being questioned be polite and courteous and answer each question truthfully. It is not wise to lie to the IRS.

    Gather the right documentation

    Make sure that all the documents presented are accurate, clear, and on time. Be sure you have all the documents at the auditing. If you have all the correct information the auditing process will run much smoother.

    Request more time

    If you feel that you need more time to prepare for the audit you can request it. Don’t hesitate to let the IRS know. You can go on their website and request more time to prepare.

    What Happens After an IRS Audit is Done?

    Once all the auditing is wrapped up you will receive an examination report, which is wise to look over carefully for anything that might confuse you. Don’t hesitate to call the IRS and ask about anything you need to clarify. If you disagree with a finding let them know, so that you and the auditor can come to a compromise.

    If you follow these tips then the audit process will be a breeze, or at least a little easier to handle.

    Avoid tax burdens with Optima Tax Relief. Read more about the benefits of working with a tax relief company.

    You can learn more about the different types of IRS audits and What Happens in an IRS audit in our dedicated blog post.

    When Filling Your 1099 Avoid These Common Pitfalls

    Every year around tax filing time as the deadline draws closer many employees scramble to file their taxes, however many seem to make the simplest mistakes that may end up costing them in the end. Some even meet the unfortunate fate of having Uncle Sam knock on their door or more realistically come to the mail to open an audit notification from the IRS.

    What is a 1099 form?

    For those that don’t know, 1099 forms are for people who are self-employed, have stocks dividends, capital gain distribution, or are receiving unemployment benefits. They are given to the employee from the company who has made them an independent contractor and pays them over $600 for their services. The company has a copy, and they send you the form to fill out as well. Before filing your 1099, here are a few tips that can help 1099 employees avoid these common pitfalls.

    What are the Different Types of 1099s?

    To not be confused there are several types of 1099 forms to file. They all can be found at the IRS website. Don’t file the wrong one or you will get fined from the IRS.

    1099-DIV

    The 1099-DIV is for those who need to report stocks and dividend as well as capital gain distributions.

    1099-MISC

    The1099-MISC is for those who are independent contractors or collect real estate disbursements or tips. It is also the one form you will fill out if you are considered an employee.

    1099-INT

    The 1099-INT is used to report interest income, and several other variations of the form.

    How do You File Taxes with a 1099?

    Need to file your taxes with a 1099? Follow these tips to help you.

    1. Make sure the information is accurate. Report your income that you make right. Not only do you have a copy of your 1099, but the company, and the IRS have the copy that the company has sent them. So whether you report the correct information or not, the IRS already knows what it should be, if you report less than earned income they will tax you, add on interest to the tax you owe, and probably audit you.

    2. Always, always, always file the W-9. People seem to always make this common mistake, but you must fill it out correctly if you are hired as an independent contractor. If you made more than $600 from the contractor, you must report it.

    3. The 1099 form is not a tax return but rather valuable information that the IRS needs. You still need to file you 1040 and input the information where designated from your 1099.

    4. Be extra careful when filling out your 1099 that you have the right account number, especially if you have to file multiple 1099-MISCs. Just like filing your regular tax returns, remember to sign and date all your pages. Include the right social security number and if needed, always have a professional look over your form or use a tax software.

    Still need some assistance? Consider working with a tax relief company. Unsure if you should work with a tax preparer? Learn more about the tax preparers and how you can avoid getting scammed here.

    Medical Identity Fraud – A Risk to Your Health and Wealth

    Imagine this scenario: you’re sitting in a doctor’s office with a long-lasting fever after your camping trip. Because it may be an infection from a tick bite, the doctor decides to give you an antibiotic shot. She glances at your records, swabs your arm with alcohol, picks up the syringe and says “this little dose of penicillin should help…” and you interrupt: “wait, I’m allergic to penicillin.” “But, that’s not what your records say… we gave you penicillin last time you were here.”

    Frightening? Yes. Impossible? Not at all.

    Medical identity theft is on the rise and it can not only have crippling effects on your finances but can seriously put your health in jeopardy.

    The Medical Identity Fraud Alliance, a group of concerned corporate and non-profit partners,  speculate that over 2 million Americans were put at risk of medical identity theft in 2014, a figure that leaped 22% from previous research. This doesn’t even take into account the nearly 80 million individuals affected by the Anthem data breach in 2015 – the country’s largest healthcare breach.

    Identity thieves steal personal health information (PHI) such as social security numbers and medical insurance identification numbers for two main reasons:

    • For financial gain by filing fraudulent claims to your health insurer (including Medicaid/Medicare) in order to receive a reimbursement check
    • Free medical care of high cost or elective procedures or to secure prescription medication – specifically narcotics that can be abused or sold on the black market

    Financial fraud such as a stolen credit card can be frustrating, but can be quickly resolved since it’s easier to detect, and often doesn’t have significant long-term financial impacts. Medical identity fraud, on the other hand can cost a victim $13,500 on average and be notoriously difficult to resolve.

    Because of advancement in electronic communication and collaboration in the healthcare industry, PHI is more exposed and accessible. At the same time, this doesn’t always mean that your health provider is on the same page with your insurer. PHI is rarely tracked across multiple networks and this gap can make stealing and using it feasible.

    Here are a few things you can do to minimize your risk of medical identity fraud:

    • Carefully read all correspondence from your medical provider and Health Insurance Company. Treat each line item like you might for a bank statement and ensure that each charge or claim is valid.
    • Safeguard your Social Security number and healthcare data. Make sure that when you provide it, it’s absolutely necessary. It’s always okay to ask.
    • Avoid putting medical procedures and hospital stays on social media. You never know who’s looking and this piece of data could be the last one that the thief needs to commit their crime.

    Our identity protection program provides comprehensive, proactive monitoring for several data points, including your medical information. To learn more about how we can help you minimize your risk of medical identity theft, visit https://optimatax.idprotectiononline.com/enrollment/.

     

    Child Identity Theft

    Parents do their best to keep their children safe. They advise them to wear a helmet when biking, avoid talking to strangers, and look both ways before crossing the street. But there’s one type of danger that’s hard to avoid. A recent study indicated that up to 10% of America’s youth have potentially been targets of identity theft.

    The large majority of children under the age of 18 have blank credit profiles which make them uniquely valuable to identity thieves. There’s no credit profile established, children’s social security numbers can be paired with any name to buy cars, apply for loans, open credit cards, or procure driver’s licenses.

    What makes child identity theft particularly troubling is that it can go unnoticed for several years leaving a complete financial disaster for the child when they turn 18 and begin applying for student loans, credit cards, mobile phones, or an apartment. If the incident occurred years in the past, it can be virtually impossible to track down the criminal.

    How does this happen? Even more so than adults, children’s Social Security Numbers (SSN) are used frequently as a form of identification at schools, doctor’s offices, and any number of extracurricular activities. If a child’s SSN is easily accessible in a written file or on an unprotected computer network, it could be targeted by identity thieves. Additionally, credit bureaus do not have checks in place to verify the age on credit applications. An individual’s credit profile begins when the first application is received. If the application says 26, then the credit bureaus will assume that’s true.

    While it’s impossible to absolutely prevent identity theft, there are a number of steps that can be taken to reduce your child’s risk:

    • If your child’s Social Security Number is being requested, it’s always okay to ask why it’s needed and if it’s completely neccessary. In most cases, an alternative identification number can be created.
    • don’t carry your child’s Social Security card with you. If your wallet or purse is ever lost of stolen, this could cause some big problems for you both in the future.
    • Shred or destroy any documents with your child’s SSN, such as medical or school records. If they need to be retained, make sure they are kept in a secure location.
    • Talk to your kids about the importqance of identity security. Let them know that they should never share their phone number, address, or SSN with anyone unless there’s a parent present.
    • Keep an eye out for suspicious activity. If credit card offers are arriving at your house with your child’s name on them, it’s a good sign that something isn’t right.
    • Once a year, ensure that your child’s credit is untouched by attempting to pull a credit report from any number of free credit report sites. If your child’s credit is secure, the credit bureau will not be able to provide a report. If you do request a credit report and one is returned, you should take immediate action.

    One of the best ways to protect your child’s identity is to enroll them in our family identity protection program. You can monitor your child’s date from your own dashboard and receive an alert if any suspicious activity takes place by enrolling in Optima’s Family Protection Plan at https://optimatax.idprotectiononline.com/enrollment/.