You may have heard in the news about the ‘tax gap’ - that’s the IRS estimate of the difference between what taxpayers should be paying and what the government is actually receiving. We have our own light-hearted definition: the difference between what we must pay and what we would prefer to pay.
We consider it part of our job to help you stay out of trouble with the taxing authorities in a couple of ways - by staying up to date on changing laws so they won’t trip you up, and by preparing your tax returns so that the tax bill is minimized while attracting as little attention as possible. We know sometimes you feel like we’re browbeating you with all of the rules that governments impose, and we’re not wild about doing it. But we know that as much as you dislike having to pay taxes, you dislike getting audit notices even more.
Please keep in mind that we are working for you to make sure you pay only what you must pay, and no more. That’s why we attend continuing education seminars each year, and that’s also why we ask so many questions. Sometimes your answers give us insights that lead to ways to legitimately reduce your tax burden. The more information you share with us, the better.
Because of the tax gap, Congress has told the IRS to step up efforts to try to collect more of the money they believe is due. So it’s important that we continue working together to keep your tax bill as low as legally possible while preparing your return in a way that reduces the risk of IRS questions.
One area the IRS will be scrutinizing more closely is businesses and farms that file on Schedule C or F. If you have a loss in more than two of the last five years, your tax return may be an attention-getter. Especially these days, you probably have a loss for legitimate reasons, but the IRS may ask you to show that your business is not a hobby (expenses for which are not deductible). If you foresee a series of losses, talk with us about ways you can help your business tax return avoid IRS scrutiny. If you get one of those pesky notices though, call us right away about how to respond. They don’t go away by themselves.
