5 Moves To Make Before Year End That Can Save You A Lot of Money on Your 2022 Taxes

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On August 16, 2022 President Biden signed the 2022 Inflation Reduction Act which has some favorable tax changes you should be aware especially now that we are approaching the end of 2022.

Major Changes From The New Law Include:

A three-year extension of expanded Affordable Care Act health insurance subsidies, which were set to expire at the end of 2022.

Expanding residential clean energy tax credits and clean vehicle tax credits to promote clean energy incentives.

Returning to a 50% deduction limitation for business related food and beverages starting January 1, 2023.

The Big Picture:

With many itemized deductions having disappeared by the 2017 Tax Cuts And Jobs Act and a higher standard deduction, less taxpayers will be itemizing deductions in 2022 but there is still significant tax planning you can do.

For 2022, the standard deduction amounts are: $12,950 (single); $19,400 (head of household); $25,900 (married filing jointly and surviving spouse); and $12,950 (married filing separately). The additional standard deduction amount for taxpayers who are 65 or older or blind is $1,400. This additional amount is increased to $1,750 if the individual is also unmarried and not a surviving spouse.

If your itemized deductions in 2022 will be close to your standard deduction amount, consideration should be given to paying certain deductible amounts (such as medical and charitable expenses) in 2022 rather than 2023 to the extent possible, or vice versa. In other words, determine whether bunching deductions in one year and taking the standard deduction in alternate years can provide a net-tax benefit over the two-year period.

Following are five year-end tax moves to make before this New Year’s Day:

  1. Give more to charity in 2022.

In addition to the usual dollar donations to charities, religious institutions and educational institutions, consider clearing your home of those unwanted household goods and clothing to give to charities. Many groups will accept these items even vehicles, with some even making arrangements to pick up them up from your home. You may also consider to donate stock or mutual funds that you’ve held for more than a year but that no longer fit your investment goals. The charity gets the asset to hold or sell, and your portfolio re-balancing nets you a deduction for the asset’s value at the time of gifting. Even better, you do not have to worry about capital gains taxes on the appreciation of your gift. Remember that if you take the standard deduction in 2022, you won’t get any tax savings from your charitable contributions made in 2022.

  1. Make the most of your home – mortgage interest.

Home-ownership provides a variety of tax breaks, some of which you can use by year-end to reduce your current year’s tax bill. Make your January mortgage payment by December 31st and deduct the mortgage interest on your 2022 tax return.

  1. Make the most of your home – property taxes.

Like prepaying mortgage interest, the same tactic will apply for property taxes; however, keep in mind that property taxes along with other state and local taxes will be deductible only up to $10,000.

  1. Pay your self-employed business expenses

If you are self-employed, you should accelerate payment of your business expenses in 2022. Recognizing these expenses in 2022 will provide you with a tax savings for 2022

  1. Defer your income into 2023.

If you are a small business owner, consider delaying income until January 2023. So if you are chasing up some customers or clients to pay the bill you sent them a while ago, you might want to wait until January to get aggressive on collecting. Consider delaying the delivery of invoices for year-end jobs until January 2023.  Small business owners should make sure they are benefiting from the deduction of 20% of their business income. If you are an employee, ask your boss to hold your bonus until January. Individuals should also consider putting more money into a tax-deferred workplace retirement plan in 2022 and hold off on selling assets that will produce a capital gain until 2023.

What Should You Do?

With not much time left in 2022 you will need to act quickly on those tax moves that are easy to accomplish to reduce your tax bill.

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also, if you are involved in cannabis, check out what our cannabis tax attorney can do for you. Additionally, if you are involved in cryptocurrency, check out what a bitcoin tax attorney can do for you.

IRS Criminal Investigation Division Releases Its 2022 Annual Report

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On November 3, 2022 the IRS released the Criminal Investigation Division’s (CI) annual report, highlighting significant successes and criminal enforcement actions taken in fiscal year ending September 30, 2022.  The IRS noted that a key achievement was the identification of over $31 billion in tax fraud and other financial crimes.

In issuing this report IRS Commissioner Chuck Rettig stated:  The cases the IRS-CI team investigated over the past fiscal year touch multiple continents and require cooperation with partners around the globe. This is why IRS-CI continues to cement itself as the preeminent law enforcement agency investigating financial crimes on a global scale.

According to the report, CI initiated over 2,550 cases in fiscal year 2021 (up from 2,500 in the previous fiscal year), applying approximately 70% of its time to tax related investigations. CI is the only federal law enforcement agency with jurisdiction over federal tax crimes achieving a conviction rate of over 90.6% in fiscal year 2022.   IRS-CI is the only U.S. federal law enforcement agency that focuses 100% on financial investigations.

IRS Criminal Investigation Division Expands Its International Network

The report states that in the last fiscal year IRS-CI built upon its existing network of U.S. field offices and international attachés to combat financial crimes across the globe through the agency’s alliance with the Joint Chiefs of Global Tax Enforcement (J5) and public-private partnerships with financial institutions and the Fin-Tech industry to deter and identify criminal activity. Additionally, IRS-CI joined Taskforce Kleptocapture in March 2022 to target Russian oligarchs and other sanctions-evaders and to identify potential sanction evaders or sanctioned assets as part of a global strategy to deter Russia’s aggression. As of September 2022, the agency had identified nearly 50 individuals and entities for potential sanctions-related enforcement.

IRS-CI Chief Jim Lee stated “Our team follows the money. We’ve been doing it for more than 100 years, and we’ve followed criminals into the dark web and now into the metaverse. Tax and other financial crimes know no borders. If you violate the law and end up in the crosshairs of an IRS-CI special agent, you are likely going to jail.”

Case Examples Included In The Annual Report

The Tampa Field Office investigated Michael Dexter Little for tax-related crimes. He was sentenced to 19 years and six months in federal prison in January 2022 for conspiracy to commit wire fraud, conspiracy to commit money laundering and aggravated identity theft. Little also had to forfeit at least $12.3 million, traceable to his offenses. He filed a series of false tax returns, claiming massive, bogus fuel tax credits. He filed the false returns in his own name and the names of co-conspirators, as well as identity theft victims. He obtained at least $12.3 million in fraudulent tax refunds and attempted to obtain at least $27 million more. Little and his co-conspirators used scheme proceeds to purchase real estate and other assets for themselves.

The Oakland Field Office investigated Jeff and Paulette Carpoff for running a billion-dollar fraud scheme centered around DC Solar. Investors were duped into investing in DC Solar based on fake financial and engineering reports, and the money was used to fund the Carpoffs’ lavish lifestyle, which included a NASCAR sponsorship, ownership of a minor league baseball team, luxury real estate and more. The federal government seized and auctioned off 148 of the Carpoffs’ vehicles to recoup more than $8 million for scheme victims. In November 2021, Jeff Carpoff was sentenced to 30 years in prison, and in June, Paulette Carpoff was sentenced to 11 years in prison.

The Special Agent’s Role In The IRS Criminal Investigation Division

An IRS Special Agent works for CI. Special Agents are duly sworn law enforcement officers who are trained to “follow the money”. They investigate potential criminal violations of the Internal Revenue Code, and related financial crimes. Unless they are working undercover they will identify themselves with credentials which include a gold badge. The same gold badge appears on their business cards. Generally, IRS Special Agents travel in pairs if they are going to interview someone. One to conduct the interview, and the other to take notes, and act as a witness if necessary.

If you are contacted by an IRS Special Agent it is because he or she is conducting a CRIMINAL investigation. It is possible that the Special Agent is only interested in you as a witness against the target of the IRS investigation. However, it is a bad idea to speak to Special Agent without a criminal tax attorney present. IRS Special Agents are highly trained financial investigators. If you are the target or subject of an IRS criminal investigation you are not going to talk your way out of it, by “cooperating”; instead you may be giving the IRS more evidence to use against you.

Even if the IRS Special Agent tells you that you are only a witness you should still consult with an experienced criminal tax attorney BEFORE speaking with an IRS agent. If you make misstatements that you think put you in a better light you could change your role from a witness into a target. The best tactic is to simply tell the Special Agent that you are uncomfortable talking to him until you have had a chance to speak with your attorney. Then ask him for his business card. In this way your tax attorney can contact the Special Agent directly, and determine the best course of action.

There are a number of statutes in the Internal Revenue Code that authorize the federal government to prosecute individuals, including those dealing with tax evasion, fraud and false statements, failure to file returns, failure to pay tax, etc. Some, like the tax evasion statute, are worded in particularly broad terms and may ensnare the unwary or careless taxpayers.

If CI recommends prosecution, it will give its evidence to the Justice Department to decide the special charges. Individuals are typically charged with one or more of three crimes: tax evasion, filing a false return, or not filing a tax return. All of which are tax fraud.

Two Special Programs Run By CI

With the avalanche of billions of data flowing to IRS, CI has been running two special programs: the International Tax Enforcement Group (ITEG), and the Nationally Coordinated Investigations Unit (NCIU). Both focus on increasing the rate of taxpayer compliance with income reporting requirements contained in the Internal Revenue Code – particularly those pertaining to the disclosure of foreign financial accounts, reporting of virtual currency transactions, and reporting transactions involving cannabis.

What Should You Do?

Very quickly a criminal investigation can turn to the worst for a targeted taxpayer so you should promptly seek tax counsel who can act proactively before the IRS does. Let the tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and other locations within California protect you from excessive fines and possible jail time. Also, if you are involved in cannabis, check out how a cannabis tax attorney can help you. And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

IRS Providing Tax Relief For Victims in Federal Declared Disaster Areas

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Did you miss the October 17, 2022 tax return filing deadline? Areas with a new filing deadline of February 15, 2023, include: Florida, Puerto Rico, North Carolina, South Carolina, Areas in Alaska identified under FEMA’s Major Disaster Declaration 4672 and Hinds County, Mississippi.

The IRS announced on October 5, 2022 that Hurricane Ian victims throughout both North Carolina and South Carolina now have until February 15, 2023, to file various federal individual and business tax returns and make tax payments.

This comes after the IRS announced on September 29, 2022 that Hurricane Ian victims throughout Florida now have until February 15, 2023, to file various federal individual and business tax returns and make tax payments; and after the IRS announced on September 27, 2022 that victims in parts of Alaska now have until February 15, 2023 to file various individual and business tax returns and make tax payments; and after the IRS announced on September 20, 2022 that victims of Hurricane Fiona in all 78 Puerto Rican municipalities now have until February 15, 2023 to file various individual and business tax returns and make tax payments; and after the IRS announced on September 2, 2022 that victims of the Mississippi water crisis in Hinds County now have until February 15, 2023 to file various individual and business tax returns and make tax payments

IRS Tax Relief Details

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance. Currently, relief is available to affected taxpayers who live or have a business anywhere in both the Carolinas or in the State of Florida or the Commonwealth of Puerto Rico or Hinds County, Mississippi; and individuals and households that reside or have a business in the Regional Education Attendance Areas of Bering Strait, Kashunamiut, Lower Kuskokwim and Lower Yukon, in Alaska.   Other areas in Alaska added later will also qualify for this relief.  The current list of eligible localities is always available on the disaster relief page on IRS.gov.  The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area.

For Carolina taxpayers, the tax relief postpones various tax filing and payment deadlines that occurred starting on September 25, 2022 in South Carolina and September 28 in North Carolina. As a result, affected individuals and businesses will have until February 15, 2023 to file returns and pay any taxes that were originally due during this period. This includes 2021 individual income tax returns due on October 17, 2022 and any businesses with tax returns that were originally due during this period.

The February 15, 2023, deadline also applies to quarterly estimated income tax payments due on January 17, 2023, and the quarterly payroll and excise tax returns normally due on October 31, 2022 and January 31, 2023. Businesses with an original or extended due date also have the additional time including, among others, calendar-year corporations whose 2021 extensions run out on October 17, 2022. Similarly, tax-exempt organizations also have the additional time, including for 2021 calendar-year returns with extensions due to run out on November 15, 2022.

In addition, for South Carolina taxpayers, penalties on payroll and excise tax deposits due after September 25, 2022 and before October 11, 2022, will be abated as long as the deposits are made by October 11, 2022.  For North Carolina taxpayers, penalties on payroll and excise tax deposits due after September 28, 2022 and before October 13, 2022, will be abated as long as the deposits are made by October 13, 2022.

Tax Planning Tip

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2022 return normally filed next year), or the return for the prior year (2021).

Be sure to write the FEMA declaration number on any return claiming a loss.

For Puerto Rico: “DR-3583-EM”

For Alaska: “DR-4672-AK”

For Florida: “DR-4673-FL”

For South Carolina: “DR-3585-EM-SC”

For North Carolina: “DR-3586-EM-NC”

For Mississippi Water Crisis: “EM-3582-MS”

Importance To Preserve Records

Keep in mind that the IRS has up to three years to select a tax return for audit. The FTB has up to four years to select a tax return for audit. In some cases this period is extended to six years. When a taxpayer is selected for audit, the taxpayer has the burden of proof to show that expenses claimed are properly deductible. Having the evidence handy and organized makes meeting this burden of proof much easier.

Essential Records to Have for a Tax Audit

If you are getting ready for a tax audit, one of the most important things to do is gather and organize your tax records and receipts. There’s a good chance that you have a large amount of documents and receipts in your possession. No matter how organized you are, it can be a daunting task to collect the right pieces and make sure that you have them organized and handy for the audit conference.

We have seen many tax audits that hinge on whether or not the taxpayer can provide proper documentation for their previous tax filings. A tax lawyer in Orange County or elsewhere can make sure that the documentation is complete and proper.  By submitting this to your tax attorney in advance of the audit, your tax attorney can review your documentation and determine if there are any gaps that need to be addressed before starting the dialogue with the IRS agent.

So what are the most essential tax records to have ahead of your audit? Here are a few must-have items:

  • Any W-2 forms from the previous year. This can include documents from full-time and part-time work, large casino and lottery winnings and more.
  • Form 1098 records from your bank or lender on mortgage interest paid from the previous year.
  • Records of any miscellaneous money you earned and reported to the IRS including work done as an independent contractor or freelancer, interest from savings accounts and stock dividends.
  • Written letters from charities confirming your monetary donations from the previous year.
  • Receipts for business expenses you claimed.
  • Mileage Logs for business use of vehicle.
  • Entertainment and Travel Logs for business

Tips On Reconstructing Records

Reconstructing records after a disaster is important for several reasons including insurance reimbursement and taxes. Most importantly, records can help people prove their disaster-related losses. More accurately estimated losses can help people get more recovery assistance like loans or grants.

Whether it’s personal or business property that has been lost or destroyed, here are some steps that can help people reconstruct important records.

Tax records

Get free tax return transcripts immediately using the Get Transcript on IRS.gov or through the IRS2Go app.  Tax return transcripts show line-by-line the entries made on your Federal income tax returns.  The most three recent tax years are available.

Financial statements

People can gather past statements from their credit card company or bank. These records may be available online. People can also contact their bank to get paper copies of these statements.

Property records

  • To get documents related to property, homeowners can contact the title company, escrow company or bank that handled the purchase of their home or other property.
  • Taxpayers who made home improvements can get in touch with the contractors who did the work and ask for statements to verify the work and cost. They can also get written descriptions from friends and relatives who saw the house before and after any improvements.
  • For inherited property, taxpayers can check court records for probate values. If a trust or estate existed, taxpayers can contact the attorney who handled the trust.
  • When no other records are available, people should check the county assessor’s office for old records that might address the value of the property.
  • Car owners can research the current fair-market value for most vehicles. Resources are available online and at most libraries. These include Kelley’s Blue Book, the National Automobile Dealers Association and Edmunds.

Develop And Implement Your Backup Plan

Do not wait for the next disaster to come for then it may be too late to retrieve your important records for a tax audit or for that matter any legal or business matter. And if you do get selected for audit and do not have all the records to support what was claimed on your tax returns, you should contact an experienced tax attorney who can argue the application of your facts and circumstances to pursue the least possible changes in an audit.

The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.  Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

California Franchise Tax Board Provides Tax Relief For Hurricane Ian Victims

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The California Franchise Tax Board (“FTB”) announced on October 6, 2022 special state tax relief for taxpayers and businesses affected by Hurricane Ian.

Taxpayers and businesses in presidentially declared disaster areas are granted an extension to Feb. 15, 2023, to file California tax returns on 2021 income and make any tax payments that would have been due between September 23, 2022, and February 15, 2023.

“This offers relief to taxpayers who were victims of Hurricane Ian and have a California filing requirement,” said State Controller and FTB Chair Betty T. Yee. “For some, this will mean several additional months to file their California tax returns or make their quarterly estimated tax payment to the state.”

The relief means those affected taxpayers who would have had an October 17, 2022, tax filing deadline now have until February 15, 2023 to file. However, tax year 2021 tax payments originally due on April 18, 2022, are not eligible for the extension.

This announcement by FTB follows announcements made by IRS providing similar tax relief to taxpayers affected by Hurricane Ian in Florida, South Carolina and North Carolina.  FTB automatically conforms to IRS postponement periods for presidentially declared disasters.  Taxpayers who are affected by a presidentially declared disaster may claim a deduction for a disaster loss.

Tax Planning Tip

Just like with IRS, taxpayers can claim a disaster loss with FTB in one of two ways. They may claim the disaster loss for the 2022 tax year when they file their return next spring, or they may claim the loss against 2021 income on this year’s return. An amended return may be filed by those who already have filed this year. The advantage of claiming the disaster loss on a tax year 2021 return is that FTB can issue a refund sooner.

Taxpayers should write the name of the disaster (for example, Hurricane Ian) in blue or black ink at the top of their tax return to alert FTB. If taxpayers are filing electronically, they should follow the software instructions to enter disaster information. If an affected taxpayer receives a late filing or late payment penalty notice related to the postponement period, the taxpayer should call the number on the notice to have the penalty abated.

Importance To Preserve Records

Keep in mind that the FTB has up to four years to select a tax return for audit. The IRS has up to three years to select a tax return for audit. In some cases this period is extended to six years. When a taxpayer is selected for audit, the taxpayer has the burden of proof to show that expenses claimed are properly deductible. Having the evidence handy and organized makes meeting this burden of proof much easier.

Essential Records to Have for a Tax Audit

If you are getting ready for a tax audit, one of the most important things to do is gather and organize your tax records and receipts. There’s a good chance that you have a large amount of documents and receipts in your possession. No matter how organized you are, it can be a daunting task to collect the right pieces and make sure that you have them organized and handy for the audit conference.

We have seen many tax audits that hinge on whether or not the taxpayer can provide proper documentation for their previous tax filings. A tax lawyer in Orange County or elsewhere can make sure that the documentation is complete and proper.  By submitting this to your tax attorney in advance of the audit, your tax attorney can review your documentation and determine if there are any gaps that need to be addressed before starting the dialogue with the IRS agent.

So what are the most essential tax records to have ahead of your audit? Here are a few must-have items:

  • Any W-2 forms from the previous year. This can include documents from full-time and part-time work, large casino and lottery winnings and more.
  • Form 1098 records from your bank or lender on mortgage interest paid from the previous year.
  • Records of any miscellaneous money you earned and reported to the IRS including work done as an independent contractor or freelancer, interest from savings accounts and stock dividends.
  • Written letters from charities confirming your monetary donations from the previous year.
  • Receipts for business expenses you claimed.
  • Mileage Logs for business use of vehicle.
  • Entertainment and Travel Logs for business

Tips On Reconstructing Records

Reconstructing records after a disaster is important for several reasons including insurance reimbursement and taxes. Most importantly, records can help people prove their disaster-related losses. More accurately estimated losses can help people get more recovery assistance like loans or grants.

Whether it’s personal or business property that has been lost or destroyed, here are some steps that can help people reconstruct important records.

Tax records

Get free tax return transcripts immediately using the Get Transcript on IRS.gov or through the IRS2Go app.  Tax return transcripts show line-by-line the entries made on your Federal income tax returns.  The most three recent tax years are available.

Financial statements

People can gather past statements from their credit card company or bank. These records may be available online. People can also contact their bank to get paper copies of these statements.

Property records

  • To get documents related to property, homeowners can contact the title company, escrow company or bank that handled the purchase of their home or other property.
  • Taxpayers who made home improvements can get in touch with the contractors who did the work and ask for statements to verify the work and cost. They can also get written descriptions from friends and relatives who saw the house before and after any improvements.
  • For inherited property, taxpayers can check court records for probate values. If a trust or estate existed, taxpayers can contact the attorney who handled the trust.
  • When no other records are available, people should check the county assessor’s office for old records that might address the value of the property.
  • Car owners can research the current fair-market value for most vehicles. Resources are available online and at most libraries. These include Kelley’s Blue Book, the National Automobile Dealers Association and Edmunds.

Develop And Implement Your Backup Plan

Do not wait for the next disaster to come for then it may be too late to retrieve your important records for a tax audit or for that matter any legal or business matter. And if you do get selected for audit and do not have all the records to support what was claimed on your tax returns, you should contact an experienced tax attorney who can argue the application of your facts and circumstances to pursue the least possible changes in an audit.

The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.  Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

IRS Provides Tax Relief For Hurricane Ian Victims in the Carolinas

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The IRS announced on October 5, 2022 that Hurricane Ian victims throughout both North Carolina and South Carolina now have until February 15, 2023, to file various federal individual and business tax returns and make tax payments.

This comes after the IRS announced on September 29, 2022 that Hurricane Ian victims throughout Florida now have until February 15, 2023, to file various federal individual and business tax returns and make tax payments; and after the IRS announced on September 27, 2022 that victims in parts of Alaska now have until February 15, 2023 to file various individual and business tax returns and make tax payments; and after the IRS announced on September 20, 2022 that victims of Hurricane Fiona in all 78 Puerto Rican municipalities now have until February 15, 2023 to file various individual and business tax returns and make tax payments.

IRS Tax Relief Details

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance. Currently, relief is available to affected taxpayers who live or have a business anywhere in both the Carolinas or in the State of Florida or the Commonwealth of Puerto Rico; and individuals and households that reside or have a business in the Regional Education Attendance Areas of Bering Strait, Kashunamiut, Lower Kuskokwim and Lower Yukon, in Alaska.   Other areas in Alaska added later will also qualify for this relief.  The current list of eligible localities is always available on the disaster relief page on IRS.gov.  The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area.

For Carolina taxpayers, the tax relief postpones various tax filing and payment deadlines that occurred starting on September 25, 2022 in South Carolina and September 28 in North Carolina. As a result, affected individuals and businesses will have until February 15, 2023 to file returns and pay any taxes that were originally due during this period. This includes 2021 individual income tax returns due on October 17, 2022 and any businesses with tax returns that were originally due during this period.

The February 15, 2023, deadline also applies to quarterly estimated income tax payments due on January 17, 2023, and the quarterly payroll and excise tax returns normally due on October 31, 2022 and January 31, 2023. Businesses with an original or extended due date also have the additional time including, among others, calendar-year corporations whose 2021 extensions run out on October 17, 2022. Similarly, tax-exempt organizations also have the additional time, including for 2021 calendar-year returns with extensions due to run out on November 15, 2022.

In addition, for South Carolina taxpayers, penalties on payroll and excise tax deposits due after September 25, 2022 and before October 11, 2022, will be abated as long as the deposits are made by October 11, 2022.  For North Carolina taxpayers, penalties on payroll and excise tax deposits due after September 28, 2022 and before October 13, 2022, will be abated as long as the deposits are made by October 13, 2022.

Tax Planning Tip

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2022 return normally filed next year), or the return for the prior year (2021).

Be sure to write the FEMA declaration number on any return claiming a loss.

For Puerto Rico: “DR-3583-EM”

For Alaska: “DR-4672-AK”

For Florida: “DR-4673-FL”

For South Carolina: “DR-3585-EM-SC”

For North Carolina: “DR-3586-EM-NC”

Importance To Preserve Records

Keep in mind that the IRS has up to three years to select a tax return for audit. The FTB has up to four years to select a tax return for audit. In some cases this period is extended to six years. When a taxpayer is selected for audit, the taxpayer has the burden of proof to show that expenses claimed are properly deductible. Having the evidence handy and organized makes meeting this burden of proof much easier.

Essential Records to Have for a Tax Audit

If you are getting ready for a tax audit, one of the most important things to do is gather and organize your tax records and receipts. There’s a good chance that you have a large amount of documents and receipts in your possession. No matter how organized you are, it can be a daunting task to collect the right pieces and make sure that you have them organized and handy for the audit conference.

We have seen many tax audits that hinge on whether or not the taxpayer can provide proper documentation for their previous tax filings. A tax lawyer in Orange County or elsewhere can make sure that the documentation is complete and proper.  By submitting this to your tax attorney in advance of the audit, your tax attorney can review your documentation and determine if there are any gaps that need to be addressed before starting the dialogue with the IRS agent.

So what are the most essential tax records to have ahead of your audit? Here are a few must-have items:

  • Any W-2 forms from the previous year. This can include documents from full-time and part-time work, large casino and lottery winnings and more.
  • Form 1098 records from your bank or lender on mortgage interest paid from the previous year.
  • Records of any miscellaneous money you earned and reported to the IRS including work done as an independent contractor or freelancer, interest from savings accounts and stock dividends.
  • Written letters from charities confirming your monetary donations from the previous year.
  • Receipts for business expenses you claimed.
  • Mileage Logs for business use of vehicle.
  • Entertainment and Travel Logs for business

Tips On Reconstructing Records

Reconstructing records after a disaster is important for several reasons including insurance reimbursement and taxes. Most importantly, records can help people prove their disaster-related losses. More accurately estimated losses can help people get more recovery assistance like loans or grants.

Whether it’s personal or business property that has been lost or destroyed, here are some steps that can help people reconstruct important records.

Tax records

Get free tax return transcripts immediately using the Get Transcript on IRS.gov or through the IRS2Go app.  Tax return transcripts show line-by-line the entries made on your Federal income tax returns.  The most three recent tax years are available.

Financial statements

People can gather past statements from their credit card company or bank. These records may be available online. People can also contact their bank to get paper copies of these statements.

Property records

  • To get documents related to property, homeowners can contact the title company, escrow company or bank that handled the purchase of their home or other property.
  • Taxpayers who made home improvements can get in touch with the contractors who did the work and ask for statements to verify the work and cost. They can also get written descriptions from friends and relatives who saw the house before and after any improvements.
  • For inherited property, taxpayers can check court records for probate values. If a trust or estate existed, taxpayers can contact the attorney who handled the trust.
  • When no other records are available, people should check the county assessor’s office for old records that might address the value of the property.
  • Car owners can research the current fair-market value for most vehicles. Resources are available online and at most libraries. These include Kelley’s Blue Book, the National Automobile Dealers Association and Edmunds.

Develop And Implement Your Backup Plan

Do not wait for the next disaster to come for then it may be too late to retrieve your important records for a tax audit or for that matter any legal or business matter. And if you do get selected for audit and do not have all the records to support what was claimed on your tax returns, you should contact an experienced tax attorney who can argue the application of your facts and circumstances to pursue the least possible changes in an audit.

The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.  Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

IRS Provides Tax Relief For Hurricane Ian Victims in Florida

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The IRS announced on September 29, 2022 that Hurricane Ian victims throughout Florida now have until Feb. 15, 2023, to file various federal individual and business tax returns and make tax payments.

This comes after the IRS announced on September 27, 2022 that victims in parts of Alaska now have until February 15, 2023 to file various individual and business tax returns and make tax payments and after the IRS announced on September 20, 2022 that victims of Hurricane Fiona in all 78 Puerto Rican municipalities now have until February 15, 2023 to file various individual and business tax returns and make tax payments.

IRS Tax Relief Details

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance. Currently, relief is available to affected taxpayers who live or have a business anywhere in the State of Florida or the Commonwealth of Puerto Rico; and individuals and households that reside or have a business in the Regional Education Attendance Areas of Bering Strait, Kashunamiut, Lower Kuskokwim and Lower Yukon, in Alaska.   Other areas in Alaska added later will also qualify for this relief.  The current list of eligible localities is always available on the disaster relief page on IRS.gov.  The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area.

For Florida taxpayers, the tax relief postpones various tax filing and payment deadlines that occurred starting on September 23, 2022. As a result, affected individuals and businesses will have until February 15, 2023 to file returns and pay any taxes that were originally due during this period. This includes 2021 individual income tax returns due on October 17, 2022 and any businesses with tax returns that were originally due during this period.

The February 15, 2023, deadline also applies to quarterly estimated income tax payments due on January 17, 2023, and the quarterly payroll and excise tax returns normally due on October 31, 2022 and January 31, 2023. Businesses with an original or extended due date also have the additional time including, among others, calendar-year corporations whose 2021 extensions run out on October 17, 2022. Similarly, tax-exempt organizations also have the additional time, including for 2021 calendar-year returns with extensions due to run out on November 15, 2022.

In addition, for Florida taxpayers, penalties on payroll and excise tax deposits due after September 23, 2022 and before October 10, 2022, will be abated as long as the deposits are made by October 10, 2022.

Tax Planning Tip

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2022 return normally filed next year), or the return for the prior year (2021).

Be sure to write the FEMA declaration number on any return claiming a loss.

For Puerto Rico: “DR-3583-EM”

For Alaska: “DR-4672-AK”

For Florida: “DR-4673-FL”

Importance To Preserve Records

Keep in mind that the IRS has up to three years to select a tax return for audit. The FTB has up to four years to select a tax return for audit. In some cases this period is extended to six years. When a taxpayer is selected for audit, the taxpayer has the burden of proof to show that expenses claimed are properly deductible. Having the evidence handy and organized makes meeting this burden of proof much easier.

Essential Records to Have for a Tax Audit

If you are getting ready for a tax audit, one of the most important things to do is gather and organize your tax records and receipts. There’s a good chance that you have a large amount of documents and receipts in your possession. No matter how organized you are, it can be a daunting task to collect the right pieces and make sure that you have them organized and handy for the audit conference.

We have seen many tax audits that hinge on whether or not the taxpayer can provide proper documentation for their previous tax filings. A tax lawyer in Orange County or elsewhere can make sure that the documentation is complete and proper.  By submitting this to your tax attorney in advance of the audit, your tax attorney can review your documentation and determine if there are any gaps that need to be addressed before starting the dialogue with the IRS agent.

So what are the most essential tax records to have ahead of your audit? Here are a few must-have items:

  • Any W-2 forms from the previous year. This can include documents from full-time and part-time work, large casino and lottery winnings and more.
  • Form 1098 records from your bank or lender on mortgage interest paid from the previous year.
  • Records of any miscellaneous money you earned and reported to the IRS including work done as an independent contractor or freelancer, interest from savings accounts and stock dividends.
  • Written letters from charities confirming your monetary donations from the previous year.
  • Receipts for business expenses you claimed.
  • Mileage Logs for business use of vehicle.
  • Entertainment and Travel Logs for business

Tips On Reconstructing Records

Reconstructing records after a disaster is important for several reasons including insurance reimbursement and taxes. Most importantly, records can help people prove their disaster-related losses. More accurately estimated losses can help people get more recovery assistance like loans or grants.

Whether it’s personal or business property that has been lost or destroyed, here are some steps that can help people reconstruct important records.

Tax records

Get free tax return transcripts immediately using the Get Transcript on IRS.gov or through the IRS2Go app.  Tax return transcripts show line-by-line the entries made on your Federal income tax returns.  The most three recent tax years are available.

Financial statements

People can gather past statements from their credit card company or bank. These records may be available online. People can also contact their bank to get paper copies of these statements.

Property records

  • To get documents related to property, homeowners can contact the title company, escrow company or bank that handled the purchase of their home or other property.
  • Taxpayers who made home improvements can get in touch with the contractors who did the work and ask for statements to verify the work and cost. They can also get written descriptions from friends and relatives who saw the house before and after any improvements.
  • For inherited property, taxpayers can check court records for probate values. If a trust or estate existed, taxpayers can contact the attorney who handled the trust.
  • When no other records are available, people should check the county assessor’s office for old records that might address the value of the property.
  • Car owners can research the current fair-market value for most vehicles. Resources are available online and at most libraries. These include Kelley’s Blue Book, the National Automobile Dealers Association and Edmunds.

Develop And Implement Your Backup Plan

Do not wait for the next disaster to come for then it may be too late to retrieve your important records for a tax audit or for that matter any legal or business matter. And if you do get selected for audit and do not have all the records to support what was claimed on your tax returns, you should contact an experienced tax attorney who can argue the application of your facts and circumstances to pursue the least possible changes in an audit.

The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.  Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

IRS Provides Tax Relief For Victims Of Alaska September 2022 Storms and Floods

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The IRS announced on September 27, 2022 that victims in parts of Alaska now have until February 15, 2023 to file various individual and business tax returns and make tax payments.

This comes after the IRS announced on September 20, 2022 that victims of Hurricane Fiona in all 78 Puerto Rican municipalities now have until February 15, 2023 to file various individual and business tax returns and make tax payments.

IRS Tax Relief Details

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance. Currently, relief is available to affected taxpayers who live or have a business anywhere in the Commonwealth of Puerto Rico; and individuals and households that reside or have a business in the Regional Education Attendance Areas of Bering Strait, Kashunamiut, Lower Kuskokwim and Lower Yukon, in Alaska.   Other areas in Alaska added later will also qualify for this relief.  The current list of eligible localities is always available on the disaster relief page on IRS.gov.  The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area.

The tax relief postpones various tax filing and payment deadlines that occurred starting on September 17, 2022. As a result, affected individuals and businesses will have until February 15, 2023 to file returns and pay any taxes that were originally due during this period. This includes 2021 individual income tax returns due on October 17, 2022 and any businesses with tax returns that were originally due during this period.

The February 15, 2023, deadline also applies to quarterly estimated income tax payments due on January 17, 2023, and the quarterly payroll and excise tax returns normally due on October 31, 2022 and January 31, 2023. Businesses with an original or extended due date also have the additional time including, among others, calendar-year corporations whose 2021 extensions run out on October 17, 2022. Similarly, tax-exempt organizations also have the additional time, including for 2021 calendar-year returns with extensions due to run out on November 15, 2022.

In addition, for Puerto Rico victims, penalties on payroll and excise tax deposits due after September 17, 2022 and before October 3, 2022, will be abated as long as the deposits are made by October 3, 2022.  For qualified Alaska victims, penalties on payroll and excise tax deposits due after September 15, 2022 and before September 30, 2022, will be abated as long as the deposits are made by September 30, 2022.

Tax Planning Tip

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2022 return normally filed next year), or the return for the prior year (2021).

Be sure to write the FEMA declaration number on any return claiming a loss.

For Puerto Rico: “DR-3583-EM”

For Alaska: “DR-4672-AK”

Importance To Preserve Records

Keep in mind that the IRS has up to three years to select a tax return for audit. The FTB has up to four years to select a tax return for audit. In some cases this period is extended to six years. When a taxpayer is selected for audit, the taxpayer has the burden of proof to show that expenses claimed are properly deductible. Having the evidence handy and organized makes meeting this burden of proof much easier.

Essential Records to Have for a Tax Audit

If you are getting ready for a tax audit, one of the most important things to do is gather and organize your tax records and receipts. There’s a good chance that you have a large amount of documents and receipts in your possession. No matter how organized you are, it can be a daunting task to collect the right pieces and make sure that you have them organized and handy for the audit conference.

We have seen many tax audits that hinge on whether or not the taxpayer can provide proper documentation for their previous tax filings. A tax lawyer in Orange County or elsewhere can make sure that the documentation is complete and proper.  By submitting this to your tax attorney in advance of the audit, your tax attorney can review your documentation and determine if there are any gaps that need to be addressed before starting the dialogue with the IRS agent.

So what are the most essential tax records to have ahead of your audit? Here are a few must-have items:

  • Any W-2 forms from the previous year. This can include documents from full-time and part-time work, large casino and lottery winnings and more.
  • Form 1098 records from your bank or lender on mortgage interest paid from the previous year.
  • Records of any miscellaneous money you earned and reported to the IRS including work done as an independent contractor or freelancer, interest from savings accounts and stock dividends.
  • Written letters from charities confirming your monetary donations from the previous year.
  • Receipts for business expenses you claimed.
  • Mileage Logs for business use of vehicle.
  • Entertainment and Travel Logs for business

Tips On Reconstructing Records

Reconstructing records after a disaster is important for several reasons including insurance reimbursement and taxes. Most importantly, records can help people prove their disaster-related losses. More accurately estimated losses can help people get more recovery assistance like loans or grants.

Whether it’s personal or business property that has been lost or destroyed, here are some steps that can help people reconstruct important records.

Tax records

Get free tax return transcripts immediately using the Get Transcript on IRS.gov or through the IRS2Go app.  Tax return transcripts show line-by-line the entries made on your Federal income tax returns.  The most three recent tax years are available.

Financial statements

People can gather past statements from their credit card company or bank. These records may be available online. People can also contact their bank to get paper copies of these statements.

Property records

  • To get documents related to property, homeowners can contact the title company, escrow company or bank that handled the purchase of their home or other property.
  • Taxpayers who made home improvements can get in touch with the contractors who did the work and ask for statements to verify the work and cost. They can also get written descriptions from friends and relatives who saw the house before and after any improvements.
  • For inherited property, taxpayers can check court records for probate values. If a trust or estate existed, taxpayers can contact the attorney who handled the trust.
  • When no other records are available, people should check the county assessor’s office for old records that might address the value of the property.
  • Car owners can research the current fair-market value for most vehicles. Resources are available online and at most libraries. These include Kelley’s Blue Book, the National Automobile Dealers Association and Edmunds.

Develop And Implement Your Backup Plan

Do not wait for the next disaster to come for then it may be too late to retrieve your important records for a tax audit or for that matter any legal or business matter. And if you do get selected for audit and do not have all the records to support what was claimed on your tax returns, you should contact an experienced tax attorney who can argue the application of your facts and circumstances to pursue the least possible changes in an audit.

The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.  Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

IRS Provides Tax Relief For Victims Of Hurricane Fiona

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The IRS announced on September 20, 2022 that victims in all 78 Puerto Rican municipalities now have until February 15, 2023 to file various individual and business tax returns and make tax payments.

IRS Tax Relief Details

The IRS is offering this relief to any area designated by the Federal Emergency Management Agency (FEMA), as qualifying for individual assistance. Currently, relief is available to affected taxpayers who live or have a business anywhere in the Commonwealth of Puerto Rico.  The current list of eligible localities is always available on the disaster relief page on IRS.gov.  The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area.

The tax relief postpones various tax filing and payment deadlines that occurred starting on September 17, 2022. As a result, affected individuals and businesses will have until February 15, 2023 to file returns and pay any taxes that were originally due during this period. This includes 2021 individual income tax returns due on October 17, 2022 and any businesses with tax returns that were originally due during this period.

The February 15, 2023, deadline also applies to quarterly estimated income tax payments due on January 17, 2023, and the quarterly payroll and excise tax returns normally due on October 31, 2022 and January 31, 2023. Businesses with an original or extended due date also have the additional time including, among others, calendar-year corporations whose 2021 extensions run out on October 17, 2022. Similarly, tax-exempt organizations also have the additional time, including for 2021 calendar-year returns with extensions due to run out on November 15, 2022.

In addition, penalties on payroll and excise tax deposits due after September 17, 2022 and before October 3, 2022, will be abated as long as the deposits are made by October 3, 2022.

Tax Planning Tip

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2022 return normally filed next year), or the return for the prior year (2021).

Be sure to write the FEMA declaration number of “DR-3583-EM” on any return claiming a loss.

Importance To Preserve Records

Keep in mind that the IRS has up to three years to select a tax return for audit. The FTB has up to four years to select a tax return for audit. In some cases this period is extended to six years. When a taxpayer is selected for audit, the taxpayer has the burden of proof to show that expenses claimed are properly deductible. Having the evidence handy and organized makes meeting this burden of proof much easier.

Essential Records to Have for a Tax Audit

If you are getting ready for a tax audit, one of the most important things to do is gather and organize your tax records and receipts. There’s a good chance that you have a large amount of documents and receipts in your possession. No matter how organized you are, it can be a daunting task to collect the right pieces and make sure that you have them organized and handy for the audit conference.

We have seen many tax audits that hinge on whether or not the taxpayer can provide proper documentation for their previous tax filings. A tax lawyer in Orange County or elsewhere can make sure that the documentation is complete and proper.  By submitting this to your tax attorney in advance of the audit, your tax attorney can review your documentation and determine if there are any gaps that need to be addressed before starting the dialogue with the IRS agent.

So what are the most essential tax records to have ahead of your audit? Here are a few must-have items:

  • Any W-2 forms from the previous year. This can include documents from full-time and part-time work, large casino and lottery winnings and more.
  • Form 1098 records from your bank or lender on mortgage interest paid from the previous year.
  • Records of any miscellaneous money you earned and reported to the IRS including work done as an independent contractor or freelancer, interest from savings accounts and stock dividends.
  • Written letters from charities confirming your monetary donations from the previous year.
  • Receipts for business expenses you claimed.
  • Mileage Logs for business use of vehicle.
  • Entertainment and Travel Logs for business

Tips On Reconstructing Records

Reconstructing records after a disaster is important for several reasons including insurance reimbursement and taxes. Most importantly, records can help people prove their disaster-related losses. More accurately estimated losses can help people get more recovery assistance like loans or grants.

Whether it’s personal or business property that has been lost or destroyed, here are some steps that can help people reconstruct important records.

Tax records

Get free tax return transcripts immediately using the Get Transcript on IRS.gov or through the IRS2Go app.  Tax return transcripts show line-by-line the entries made on your Federal income tax returns.  The most three recent tax years are available.

Financial statements

People can gather past statements from their credit card company or bank. These records may be available online. People can also contact their bank to get paper copies of these statements.

Property records

  • To get documents related to property, homeowners can contact the title company, escrow company or bank that handled the purchase of their home or other property.
  • Taxpayers who made home improvements can get in touch with the contractors who did the work and ask for statements to verify the work and cost. They can also get written descriptions from friends and relatives who saw the house before and after any improvements.
  • For inherited property, taxpayers can check court records for probate values. If a trust or estate existed, taxpayers can contact the attorney who handled the trust.
  • When no other records are available, people should check the county assessor’s office for old records that might address the value of the property.
  • Car owners can research the current fair-market value for most vehicles. Resources are available online and at most libraries. These include Kelley’s Blue Book, the National Automobile Dealers Association and Edmunds.

Develop And Implement Your Backup Plan

Do not wait for the next disaster to come for then it may be too late to retrieve your important records for a tax audit or for that matter any legal or business matter. And if you do get selected for audit and do not have all the records to support what was claimed on your tax returns, you should contact an experienced tax attorney who can argue the application of your facts and circumstances to pursue the least possible changes in an audit.

The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.  Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you.  And if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.

How the Inflation Reduction Act is Overhauling the IRS into “Beast Mode”

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Under the Inflation Reduction Act the IRS is receiving $80 billion in new funding. Speaking at an IRS facility in New Carrollton, Maryland on September 15, 2022, Treasury Secretary Janet Yellen stated that “the Inflation Reduction Act finally provides the funding to transform the IRS into a 21st century agency,” Yellen said.  “While all the improvements won’t be done overnight, taxpayers can expect to feel real differences during the next filing season.”

Taxpayers could also see a difference in more audits as Congress in passing this law allocated $45.6 billion of this additional funding to audit the middle class.

Democrats claim this “investment” will yield more than $200 billion in revenue. That estimate is highly speculative, but for certain it adds a lot of resources for IRS auditors to soon come after tens of millions of Americans with audits.  The $80 billion price tag is more than six times the current annual IRS budget of $12.6 billion. The money will be distributed to IRS over nine years and comes with few strings attached.

Democrats are looking to the IRS to come down hard on taxpayers with Senators Schumer and Manchin stating that it is time for the agency to go into “beast mode”.  The law earmarks $45.6 billion for “enforcement,” including “litigation,” “criminal investigations,” “investigative technology,” “digital asset monitoring” and a new fleet of tax-collector cars. The intended result will be far more audits, civil suits and criminal referrals.

The main targets will by necessity be the middle- and upper-middle class because that’s where the government believes the money is. The Joint Committee on Taxation, Congress’s official tax scorekeeper, says that “78% to 90% of the money raised from under-reported income would likely come from those making less than $200,000 a year. Only 4% to 9% would come from those making more than $500,000.”

It is reported that a particular audit target will be “pass throughs” including Subchapter S and LLC businesses that file under the individual tax code. With the proliferation of States legalizing cannabis, it would not be surprising for the IRS to increase audits for this industry too.  Democrats keeping their promise not to raise individual tax rates, have resorted to increasing audits as a way of increasing tax revenues.

Importance To Preserve Records

Keep in mind that the IRS has up to three years to select a tax return for audit. For California taxpayers, the Franchise Tax Board has up to four years to select a California State Income Tax Return for audit. In some cases these 3 and 4 year periods are extended to six years. When a taxpayer is selected for audit, the taxpayer has the burden of proof to show that expenses claimed are properly deductible. Having the evidence handy and organized makes meeting this burden of proof much easier.

Essential Records to Have for a Tax Audit

If you are getting ready for a tax audit, one of the most important things to do is gather and organize your tax records and receipts. There’s a good chance that you have a large amount of documents and receipts in your possession. No matter how organized you are, it can be a daunting task to collect the right pieces and make sure that you have them organized and handy for the audit conference.

We have seen many tax audits that hinge on whether or not the taxpayer can provide proper documentation for their previous tax filings. A tax lawyer in Orange County or elsewhere can make sure that the documentation is complete and proper.  By submitting this to your tax attorney in advance of the audit, your tax attorney can review your documentation and determine if there are any gaps that need to be addressed before starting the dialogue with the IRS agent.

So what are the most essential tax records to have ahead of your audit? Here are a few must-have items:

  • Any W-2 forms from the previous year. This can include documents from full-time and part-time work, large casino and lottery winnings and more.
  • Form 1098 records from your bank or lender on mortgage interest paid from the previous year.
  • Records of any miscellaneous money you earned and reported to the IRS including work done as an independent contractor or freelancer, interest from savings accounts and stock dividends.
  • Written letters from charities confirming your monetary donations from the previous year.
  • Receipts for business expenses you claimed.
  • Mileage Logs for business use of vehicle.
  • Entertainment and Travel Logs for business

Appealing Results Of An IRS Tax Audit

Now if your IRS tax audit is not resolved, the results may be challenged. After the Revenue Agent has concluded the tax examination, the agent will issue a copy of the examination report explaining the agent’s proposed changes along with notice of your appeals rights. Pay attention to the type of letter that is included as it will dictate the appeals process available to you.

The “30-day letter”

The “30-day letter” gives you the right to challenge the proposed adjustment in the IRS Office Of Appeals. To do this, you need to file a Tax Protest within 30 days of the date of the notice. The Appeals Office is the only level of appeal within the IRS and is separate from and independent of the IRS office taking the action you disagree with. Conferences with Appeals Office personnel are held in an informal manner by correspondence, by telephone, or at a personal conference.

The “Notice Of Deficiency”

If the IRS does not adopt your position, it will send a notice proposing a tax adjustment (known as a statutory notice of deficiency). The statutory notice of deficiency gives you the right to challenge the proposed adjustment in the United States Tax Court before paying it. To do this, you need to file a petition within 90 days of the date of the notice (150 days if the notice is addressed to you outside the United States). If you filed your petition on time, the court will eventually schedule your case for trial at the designation place of trial you set forth in your petition. Prior to trial you should have the opportunity to seek a settlement with IRS Area Counsel and in certain cases, such settlement negotiations could be delegated to the IRS Office Of Appeals. If there is still disagreement and the case does go to trial, you will have the opportunity to present your case before a Tax Court judge. The judge after hearing your case and reviewing the record and any post-trial briefs will render a decision in the form of an Opinion. It could take as much as two years after trial before an Opinion issued. If the Opinion is not appealed to a Circuit Court Of Appeals, then the proposed deficiency under the Opinion is final and your account will be sent to IRS Collections.

IRS Area Counsel are experienced trial attorneys working for the IRS whose job is to litigate cases in the U.S. Tax Court and look out for the best interests of the Federal government. So to level the playing field, it would be prudent for a taxpayer to hire qualified tax counsel as soon as possible to seek a mutually acceptable resolution without the need for trial, and if that does not happen, to already have the legal expertise in place to vigorously defend you at trial.

What Should You Do?

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Los Angeles and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income. Also if you are involved in cannabis, check out what a cannabis tax attorney can do for you and if you are involved in crypto-currency, check out what a Bitcoin tax attorney can do for you.

Florida Tax Preparer Sentenced To Prison For Criminal Contempt

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Tax Preparer Defied Court Injunction Prohibiting the Filing of IRS Returns.

A Florida man was sentenced to one year and one day in prison on August 25, 2022 for criminal contempt for continuing to prepare and file tax returns with the IRS in violation of a federal court order barring him from doing so.

Tax Houses And Accounting Services of Lauderdale Lakes, Florida

The Tax Division of the U.S. Justice Department (“DOJ”) announced that on August 25, 2022, a federal court in the Southern District of Florida issued the sentence on Guy Telfort, of Fort Lauderdale, Florida, who previously owned and operated Tax Houses and Accounting Services, a Lauderdale Lakes tax preparation business.

The announcement relying on court documents and statements made in court states that from approximately January 2015 through April 2019, Telfort and his employees prepared and filed tax returns for clients. In order to generate inflated IRS refunds for clients, some of these returns reported false items, including fictitious business income and losses and mileage deductions. On April 24, 2019, the U.S. District Court for the Southern District of Florida entered an injunction against Telfort in a civil proceeding, permanently barring Telfort from preparing federal tax returns for others.

Despite this court-ordered injunction, in 2020 and 2021, Telfort continued to prepare and file returns, working out of an Oakland Park, Florida, pawn shop. Telfort charged clients as much as $1,000 for each return filed with the IRS. Some of these tax returns reported false medical and dental expenses and charitable contributions, as well as fictitious businesses. To disguise his role in preparing these returns, Telfort used IRS Preparer Tax Identification Numbers belonging to other tax preparers. Over the two-year period, Telfort prepared nearly 1,200 tax returns for clients in willful violation of the permanent injunction.

In addition to the term of imprisonment, U.S. District Judge Federico A. Moreno ordered Telfort to serve three years of supervised release and pay $762,338.88 in restitution to the United States.

Actions by DOJ help support IRS’ campaigns to fight refund fraud and identity theft. 

“Identity theft is a pervasive crime and stopping it remains a top priority of the IRS,” said IRS Commissioner Chuck Rettig. “The IRS, with the help of our Security Summit partners, continues to make progress in this area, but we need to continue our significant efforts to protect taxpayers and assist those who have been a victim of identity theft. We are fighting this problem with enhanced systems, smarter technology and the efforts of our dedicated workforce, including Criminal Investigation. We will retain our relentless, vigorous pursuit of those who prey upon others in this arena”.

The Office of the Chief of IRS Criminal Investigation (“CI”) has previously stated that “Millions of taxpayers put their trust in tax professionals to prepare accurate and lawful returns. Unfortunately, a few bad apples take advantage of that trust for their own greed and profit. CI’s special agents are highly skilled at unraveling fraudulent schemes. With our partners in other agencies and the private sector, we are dismantling these crooked enterprises and enforcing our tax laws.”

What Should You Do?

Whether you are a victim or the perpetrator of identity theft or refund fraud, it is important that you seek legal counsel as soon as possible to preserve your rights and/or mitigate your losses.  The tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), San Francisco Bay Area (including San Jose and Walnut Creek) and elsewhere in California know exactly what to say and how to handle issues with the IRS as well as State Tax Agencies.  Our experience and expertise not only levels the playing field but also puts you in the driver’s seat as we take full control of resolving your tax problems. Also, if you are involved in cannabis, check out what our cannabis tax attorney can do for you.  Additionally, if you are involved in crypto currency, check out what a bitcoin tax attorney can do for you.