Tax Audit Red Flags: Separating fact from fiction

Tax Audit Red Flags: Separating fact from fiction

Tax audit red flags: separating fact from fiction. It is that time of the year again, when the early tax filing season is upon us and interest not he IRS is at a yearly high. In response, you will see article published claiming to give you the “secret sauce” on how to avoid an IRS tax audit, by warning you of “red flags.” There articles are all fine, I suppose, if this was 2008. However, the IRS has changed drastically since then. In this article, we will discuss what the real audit red flags are, and what is just sort of things are outdated. 2008 marked the high-water mark of IRS examinations. However, since then, the IRS field examiners are dwindling in supply. What this means is that for most people who used to be under threat of an audit, really aren’t. However, a strange by-product is that certain people are in much more likely to be audited. The philosophy of the IRS examinations was to spread the misery around equally. Everyone was subject to audit. But now, there is an entirely new way of thinking about how the IRS actually selects individuals to audit. Old: Ensure compliance all around Now: Where is the highest return on investment (ROI) of auditors’ time. So…what can be done automatically? The highest ROI is usually find where no or few IRS employees are needed. For instance the IRS has an Automated Underreporting Unit. Leaving off income items, like 1099s can result in an automatic adjustment. The IRS send you a notice (usually a CP2000) to let you know they intend on increasing your income tax, they also give you an opportunity to contest. A common area of contesting these assessments is when the IRS doesn’t take into account your basis, or cost of the property you sold. If the IRS get a 1099s for you selling real estate and stock, the IRS may consider all of the proceeds as income. Yet we know this is very unlikely — real estate and stocks cost you something . What aren’t Red Flags. These things used to be Red Flags, but perhaps are now yellow flags. Why, because it actually take an audit to determine if it is worth it to audit you! The IRS would rather now for sure an audit will likely lead to an increase, not could. But likley. Making a lot of money Higher than average deductions Claiming rental losses. Taking large charitable deductions. Hobby losses Deducting meals travel and entertainment. Claiming 100% business use of vehicle Claiming professional trader in order to immediately utilize losses instead of being limited to $3000 per year offset. Not reporting gambling wins. Claiming home office deduction Large cash deposits. Running a business. So what has the maximum ROI per employee hour worked? Very hard to beat foreign returns with foreign income — they can be penalty minefields — and obviously so. An expert on intentional taxation can look at a return and find facial errors that would lead to an automatic $10,000 penalty. It is actually pretty easy ti determine if a Form 5471, Form 8938, Form, 3520-A, Form 3520, or a Form 926 needed to be filed, but wasn’t. It is easy to determine if they are o substantially complete to be counted as being filed. And these five forms — each has a $10,000 penalty that could be assessed easily. For multiple years. So do you see how the IRS would be interesting in auditing an international return of moderate complexity? The problem is that with foreign assets and income. Your options are to: leave it off and face the prospect of huge penalties that could destroy you if detected. Do it yourself and hope for the best. Yet reporting can increase your audit risk. Hire a firm experienced with winning IRS international audits to minimize any a penalty exposure. What if you haven’t been reporting foreign income properly? The good news is that most people qualify for a streamlined disclosure program and this can really eliminate any penalty potential. We have submitted hundreds and not one has been audited as of today. For help contact us today. We help US taxpayers around the globe. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 Skype: skype@irsmedic.com Email info@irsmedic.com https://youtu.be/Dqi-PG6YvJM IRS Medic

Welcome to IRSMedic! Suscribe now for real tax guidance.

Welcome to IRSMedic! Suscribe now for real tax guidance.

http://ift.tt/1RfwK1f There is nothing in the history of the world as complicated as the US tax code. And every day with new laws, new regulations, new court cases, and new procedures it gets even more complicated. Now —- the other part of this compliance sandwich — that puts you right in the middle — is that the consequences for doing something wrong. Whether intentionally or not, the impact can be devastating. I am tax attorney Anthony Parent of Parent & Parent LLP and that’s why I created the IRSMedic channel. Our content formula is simple we take the complicated code, jargon, and BS, and employ our 20 years of experience to simplify to something understandable to an actual human being, so that you can figure out what kind of action you should take, if any. Whether you are a taxpayer, a fellow tax practitioner, a fellow attorney, or even an IRS employee, my advice: Subscribe to our channel because our videos could really help you get your head and hands around a complicated US tax problem, so that you can avoid a discomfort that others might not have been not able to. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com http://ift.tt/2D0JRlA https://youtu.be/q30wyP8IoUc IRS Medic

Tax Reform & Subpart F: The good, the bad and what to do about it.

Tax Reform & Subpart F: The good, the bad and what to do about it.

If you are a US person and have a Controlled Foreign Corporation you may be subjected to the dreaded Subpart F rules. While tax reform initially looked promising and helpful, the result is less than desirable. While some income like oil and gas income is no longer subjected to Subpart F, tax reform instituted a hair-trigger test to determine CFC status. And perhaps more consequential, is that tax reform imposed an "excise tax" tax on retained earnings. Meaning if you avoided Subpart F over the years, you may not be able to entirely avoid a 15.5% tax on your built-up foreign income. This new taxing regime is testing our ability to find creative ways to lower our clients' tax bills, while avoiding any of the very severe foreign reporting penalties. Subscribe now so you will learn about these strategies we will be discussing in future episodes. If you are a prospective client contact us at: Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/YJ4HaYPofgI IRS Medic

Welcome to the IRSMedic channel

Welcome to the IRSMedic channel

There is nothing in the history of the world as complicated as the US tax code. And every day with new laws, new regulations, new court cases, and new procedures it gets even more complicated. Now —- the other part of this compliance sandwich — that puts you right in the middle — is that the consequences for doing something wrong. Whether intentionally or not, the impact can be devastating. I am tax attorney Anthony Parent of Parent & Parent LLP and that’s why I created the IRSMedic channel. Our content formula is simple we take the complicated code, jargon, and BS, and employ our 20 years of experience to simplify to something understandable to an actual human being, so that you can figure out what kind of action you should take, if any. Whether you are a taxpayer, a fellow tax practitioner, a fellow attorney, or even an IRS employee, my advice: Subscribe to our channel because our videos could really help you get your head and hands around a complicated US tax problem, so that you can avoid a discomfort that others might not have been not able to. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com http://ift.tt/1RfwK1f https://youtu.be/jdE60o1fOdo IRS Medic

Put America first by putting Americans first. End global taxation and compliance bloat

Put America first by putting Americans first. End global taxation and compliance bloat

Joining us today from citizenshipsolutions.ca is tax attorney John Richardson as we discuss why every American is entitled to a better tax system than our current mess, a subduction where confusion crashes into consequences. Repeal FATCA and Stop Imposing Direct Taxation on the residents of other countries! – Americans deserve a first class tax system, a system that allows American citizens to compete with the rest of the world! John Richardson counsels US citizens in Canada and abroad, and can give us some insight into how U.S. “citizenship” AKA “place of birth taxation” HURTS American citizens living in other countries and ultimately HURTS America! Here is the outline of what we discussed: FATCA/CBT repeal – How are FATCA and CBT related? Why should each of them be repealed? Which of FATCA or CBTR is the greater harm? We need to change the ideas on the best way to get this accomplished America deserves a modern tax system – a tax system that allows America and American citizens to effectively compete in a global world. America shouldn’t have a tax system that prevents U.S. citizens living outside the United States from competing for the United States in those countries Why are we working so hard to repeal FATCA? Why are we working so hard to repeal CBT: the U.S. practice of exporting the Internal Revenue Code to other countries and imposing it on people who live in other countries? Who is this really hurting? How much is FATCA and other disclosure programs actually bringing in, compared to costs of resources? (auditors don’t even want to touch foreign returns) What is the result the IRS is hoping to get? What is Congress hoping to achieve by imposing direct taxation on people who are “tax residents” of other countries Why is repealing FATCA important to homeland Americans? Why should Homeland Americans be concerned about this at all? “The world is your oyster, unless you’re American” but you don’t realize until it’s too late How does our tax system impose our value system on other countries? How does U.S. tax compliance for Americans who are residents in other countries really work? How does it make it impossible for those affected by it to live normal financial lives? Saving for retirement, pensions, have business partners, have marriage partners who are NOT U.S. citizens? Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com http://ift.tt/1RfwK1f https://youtu.be/vRT7pvOxVvE IRS Medic

Understanding how the IRS 20% Qualified Business Income (QBI) deduction works

Understanding how the IRS 20% Qualified Business Income (QBI) deduction works

http://ift.tt/2DvX0Ib The 2017 Tax Cuts and Jobs Act (otherwise known as the 2017 tax reform) includes a fantastic tax benefit for many entrepreneurs, self-employed individuals, and investors by allowing them to deduct 20% of their business income. The problem is that the rules are incredibly complicated. In this article, we will explain the basics of how it works and under which circumstances you may want to consult with a tax advisor so that you can best take advantage of this new tax break. A very basic example of how QBI works For this hypothetical, let's assume a taxpayer makes $300,000 in profit as a self-employed civil engineer, and he files jointly. This engineer is able to deduct 20% of his profit, in this case $60,000 from his tax return. So even before any other deductions or the standard deduction, he is taxed on not $300,000, but $300,000 less 60,000 for a taxable income of $240,000. Based on the revised tax brackets, the marginal tax rate at play in this example is 32%, meaning the QBI for this engineer is worth $60,000 x .32 = $19,000. QBI has saved this taxpayer $19,000 in taxes. A taxpayer with larger QBI stands to gain even more. For example, $10,000,000 in profit would qualify for a $2,000,000 deduction. At a top tax rate of 37%, this translates into a $740,000 tax savings. Do I need to convert to or be an S-corporation to take advantage of QBI? No. This is confusing because the original break proposed by Congress was a lowered pass-through (S-corp) taxation rate of 25%. However, this did not make it into the final bill. Instead, partnerships, sole proprietors, trusts, and S-corps owners can all take advantage of the 20% QBI. What is a Specified Service Trade or Business? A Specified Service Trade or Business (SSTB) is not able to take advantage of QBI in the same way a taxpayer whose business income is NOT an SSTB can. An SSTB is any trade or business activity involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletic, financial services, brokerage services, or any trade or business is the reputation or skill of one or more of its employees. Also included are any trades or businesses involving investing and investment management, trading or dealing in securities, partnership . Engineers and architects were specifically exempted. I am in a “Specified Service Trade.” Can I use the QBI at all? Yes, as long as your adjusted gross income falls below a certain threshold. The magic number is $315,000 for married filing jointly, $207,500 for head of household, or $157,500 for single filers. If your AGI is at or below these figures, you can claim the QBI regardless if you are listed in a specific trade or service. If your AGI is above these figures, it may make sense to consider some tax planning or strategies so that you can legally take advantage of QBI. What is the top effective tax rate if I have unlimited QBI income? The top effective tax rate for investors and business owner with QBI approaches 29.8%. This is a big improvement over the previously highest top tax rate of 39.6% and the new top tax rate of 37%. Where do things get complicated with QBI? If you aren’t already confused, the QBI deduction quickly gets even more complicated. Here are situations where the use of the deduction may be significantly impaired, or require additional planning or strategies: Where income increases and you have an SSTB even though you have non-SSTB income. Where you have multiple trades and businesses and some have losses. Where one spouse has SSTB income and the other spouse does not, but total income is high. Where income increases yet W-2 wages paid are low and/or the business is not capital intensive. What should you do to maximize the use of QBI? For our clients, especially those with worldwide income and other ventures, we are always looking for and implementing ways to maximize tax benefits through various structuring. It is important to understand that this new tax reform is ripe with loopholes that we and other practitioners continue to uncover. Some of these loopholes we believe are intentional. To learn about what we can provide to you, we invite you to contact us for a complimentary strategy session. We believe the more control our clients have, the better place the world is. It is our mission to help US taxpayers around the world make their IRS problems and tax bills a bit more manageable. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/MVT1MS3MZIU IRS Medic

How Captive Insurance works and how it can really help your business

How Captive Insurance works and how it can really help your business

http://ift.tt/2CWKqBB Tax Reform did not undo the benefits of Captive Insurance companies. Learn how this great tax shelter also gives great asset protection too. Many promoters learned that business owners are incredibly agitated about litigation and will offer what they claim are lock solid asset protection plans that MUST BE OBTAINED OR ELSE. Solicitations I’ve seen are: offshore trusts complicated US holdings structure including Wyoming and Nevada corporations over-compartmentalization of assets that leads to inefficient allocation. The problem with many of these plans is that they can create more risk than they solve. First, tax compliance and accounting cost go way up. And worse, if an offshore entity is involved the tax compliance costs are even higher. Yet ever worse, the penalties for getting even technical things wrong are met with a fury unmatched by any domestic tax issues. What the sense of creating an asset protection plan that could potentially protect you from a business or person, but puts you directly in harms way of a much much more powerful organization. The IRS? The second issue is that these complicated asset protection plans have real formalities that must be followed or a court could completely ignore the structure. This is called piercing the corporate veil. If you have a trust or structure but treat all the income assets as you piggy bank, and fail to follow corporate requirements like having meetings, all your complicated work can be completely undone. A bad asset protection plan, and which there are plenty of, can create more harm than good. It can offer no true protection yet wildly increases compliance costs and compliance risks. That's why before jumping in and engagin in something incredibly complicated, a business owner should really look closely at Captive Insurance first. It offer assets protection and allows all premiums as a deduction to the operating company, but is NOT income to the Captive Insurance Company. This is a one-sided equation that can really help you reach your goals and stay there! Contact us info@irsmedic.com to discuss of a Captive Insurance should be part of your overall strategy. Parent & Parent LLP 144 S Main Street Wallingford CT 06492 (203) 269-6699 https://youtu.be/2wcZ2Rrs3-c IRS Medic