Ken: Is there anything scarier than getting a letter from the IRS with the eagle there, the internal revenue service. Yes, there is something worse than that when you open it and it says.
Daria: Dear tax payer…oh you don’t want to hear dear tax payer from the IRS. And most they're saying we really took too much of your money here’s a tax of 5 grand, but you never get those. It’s only the dear tax payer you owe because… And eve though it’s tough times and even though the IRS has been charged of getting more of the tax gap collected, in other words the money that somehow just seems to slip away all the time we don’t want you not to take the deductions you're entitled to if you itemize your taxes.
Ken: However we want to help you. I'm not sure there's a word like audit proof of return but I want to pass a few tips along that will keep the chances down. Admittedly they don’t audit a great percentage of your returns but you just wanted to be safe special attention is paid to high-income self employed individuals. It doesn’t mean if you're not one they won't check you. High-income self employed individuals who file with the schedule C.
Number one, I hate to tell you this, keep a log. Documentation is the key.
Daria: Yeah because look at this, if you send in your tax return with form 8275 which is the IRS disclosure statement and we’ll tell you about that in a minute, which basically says IRS I'm taking this deduction I know you’d love to fish eye this one on me but I have backup documentation for it. And let’s say his return comes in without the IRS disclosure statement which one of us do you think they're going to end up wanting to audit. Not the one that says hey I can back this all up or the one that says here’s my deductions.
Ken: You may also want to keep a log, you may want to go to a notary public and verify that in fact all of these things are absolutely true. I'm going to tell you between a log and turning a log into an affidavit and as devious as IRS form 8275 which is the IRS disclosure statement I'm going to tell you it’s going to be really, really tough to pin you down. All right that’s the fancy stuff.
The easy way to avoid an audit is—
Daria: Double check you put the right Social Security number there.
Ken: Your address.
Daria: Your birth date and your address are correct.
Ken: Make sure the math on your W2 and your 1099 is correct, all of a sudden it spits it up just like an automatic calculator. Be careful, this is a very good stuff. A good friend of ours Dan Pilla on the website taxhelponline.com fighting the IRS. And as Daria says take all the deductions you're entitled too, take every penny but not an extra one otherwise you might be in trouble.
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