Category Archives: Tax News

The State You Live In and IRS Tax Audits

When time to file federal and state income taxes approaches, a common question that arises is: What are my chances of being audited by the IRS or my state tax authority? While the answer to this question is not simple, there are several factors that can increase the odds of facing a tax audit. While we control many of these factors such as being sure to complete all paperwork and include all required documentation when filing taxes, there are some factors that can be a little more difficult to control.

In an article on Accountingtoday.com, California, Colorado and Nevada had the most users of taxauditdefense.com who faced IRS tax audits in 2014, while New York, Massachusetts, and Alabama faced the most state tax audits. Included in the top ten for most IRS tax audits was also Vermont, Missouri, New Mexico, Arizona, Massachusetts, Florida, and Rhode Island. Rounding out the top ten states with the most tax audits were Delaware, Michigan, Mississippi, Arkansas, Oregon, Montana, and Maine.

While being number one is a great thing for sports fans, reading these statistics may have a tendency to cause a California taxpayer to cringe. However, this statistic should not worry you since California is also the state where the most income tax returns are filed with the IRS. According to the IRS of 240,075,782 total returns filed for fiscal year 2013, 28,590,971 tax returns were filed in California. This is a significantly greater amount of returns than any other state. For example, in Ohio 8,478,748 tax returns were filed, North Carolina had 6,726,971 returns filed, Indiana had only 4,629,917 returns filed, Tennessee had 4,301,190 returns filed, and Kentucky only had 2,874,239 returns filed. This case of less returns filed leading to less tax audits doesn’t hold true in the case of Colorado. While taxauditdefense reported Colorado as the state facing the second most tax audits, Colorado only had 4,367,301 returns filed, and Nevada which was reported as third only had 2,064,632 returns filed.

It seems that in some instances, more returns can certainly lead to more audits, however as proven by the listed statistics some states do seem to face more tax audits. Ultimately, it is most important to focus on the factors that you can control when filing your taxes with both the IRS and state taxation authorities.

 

 

Sources:
Accounting Today

Market Watch

IRS

TAX SEASON DELAY WILL AFFECT SOME TAXPAYERS

On Tuesday, October 22, 2013, the Internal Revenue Service announced that the 2014 tax season for filing 2013 tax returns will be delayed one to two weeks due to the recent federal government shutdown.  In December, the IRS will provide a specific date to the start of the 2014 tax season.

2013 Federal Income Tax Form 1040The impact of this delay is that some filers who file early will have to wait to have their tax returns accepted and processed by the IRS.  This means that tax refunds will be delayed to these early filers.  The IRS will not process paper tax returns or e-filed tax returns until the tax season begins.

The federal government shutdown lasted 16 days, and now the IRS has to play catch-up on the work that was not completed during the shutdown.  The reporting systems the IRS uses to process the 150+ million tax returns it receives would have been partially programmed and tested during the government shutdown.

This should not discourage you from preparing your returns early since this delay will have no impact on the April 15 deadline to file your 2013 individual income tax returns.

IRS Commissioner Steven Miller Fired Today… More action soon to follow

During the past few days, the Internal Revenue Service (IRS) has come under harsh scrutiny for how it has conducted itself in handling the applications of conservative non-profit organizations attempting to gain tax-exempt status. The IRS appears to have been acting with political overtones as opposed to following IRS guidelines for deciding whether to grant or deny tax-exempt status to these conservative non-profit groups.IRS non-profit tax exempt status The problem appears to have originated in Ohio, but according to U.S. Attorney General Eric Holder the problem is being discovered and investigated in nationwide IRS branch offices. President Obama expressed his anger today during a press conference and vowed to fully investigate this matter and bring those responsible for this misconduct to justice.

Although I do not concentrate my tax practice in assisting non-profit organizations gain tax-exempt status, I understand the practical effect of dealing with IRS officials on a daily basis, and I understand the protocol IRS Representatives must adhere to. When the IRS fails to follow federal law and its own procedures and policies, tax clients can achieve success in resolving their tax problems and issues. The national attention this issue has received was obviously magnified because of the political implications it contains. President Obama cannot allow the IRS to go un-checked; the first step has taken place, that is acting Commissioner of the IRS was forced to step down.

At Sheppard Law Offices, we deal with the IRS on a daily basis. While this specific issue has gained national attention, I want the public to know that if you have an IRS tax debt issue, there are certain guidelines and procedures in place that the IRS must follow. My job is to make sure they are doing just that, while assisting my tax clients’ to attain the most favorable outcome of the tax case with the Internal Revenue Service.