Are You Being Aggressive, Enough (Legally)?
The question in the 80′s used to be, “How far can I push it before I get audited?” However, with increased IRS enforcement, it’s now important to ask, “Will I pass an IRS audit?”
The IRS today now uses sophisticated statistical analysis with modern technology that identifies tax returns likely to yield an additional tax liability assessment.
In other words, if your numbers don’t make sense, the computers can detect these out-of-whack ratios with ease. What this means practically is that you can’t play the “audit lottery” anymore. The computers are just too good.
The question now becomes, “How can we be aggressive, legally?”
And the answer is simple: PLANNING. Actually, Year-round PLANNING.
So long as you pre-plan your tax strategy, and make sure you have ample proof to back yourself up in the implementation of the plan, there is no need to be worried about an IRS audit.
You can still be aggressive; you just need to be pro-active.
Some suggestions are have you maxed out your pension contribution? Do you have an HSA? Are you taking deductions for having an office in your home? Do you use a K or double K plan for large deductions? Have you reviewed the IRS industry specialization manual for your industry to see what the IRS is looking hard at this year?
Is your accountant an IRS tax collector, or your protector? Accountants now have to notify the IRS of some deductions on YOUR return, or be fined a minimum of $100,000. A lot of audits result from this. The form that your accountant has to file is confidential.
The information provided herein is not intended as legal, accounting, financial or any type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.
ABOUT THE AUTHOR: Lance Wallach
Lance Wallach, CLU, ChFC, CIMC, speaks and writes extensively about financial planning, retirement plans, and tax reduction strategies. He is an American Institute of CPA’s course developer and instructor and has authored numerous bestselling books about abusive tax shelters, IRS crackdowns and attacks and other tax matters. He speaks at more than 20 national conventions annually and writes for more than 50 national publications. For more information and additional articles on these subjects, call 516-938-5007.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.