5 Reasons You Are Likely to Face an Audit Trial in 2017!

Audit trials by IRS turn out to be the biggest nightmare for professionals and business owners. After successfully paying the tax, one tends to relax but one should be careful while paying their taxes because if IRS senses something fishy, one has to face an audit trial likely.

Even If you pay your taxes on time and honestly, there is a possibility of facing a trial since we are humans and we commit some mistakes for sure. These unwanted mistakes are best handled by a tax preparation services company. So, it is always advisable to take professional help for the same. Let’s see what all tax filing return mistakes have the chance of leading you to an audit trial in 2017.

5 Likely to be Audit Trial Candidates

  1. Making Huge Money

We all aim to earn more and more and there is nothing wrong in that. If you have been lucky enough to make huge amounts of money, you should be proud of yourself. However, you should be mentally prepared to face the audit trial and the reason is simple. When you make lots of money, you are always under the radar of IRS. Having said that, you need not fear for the same if you are filing your return explaining each and everything in detail!

  1. Committing Mistakes

Anyone can commit a mistake while filing his/her tax return. You may forget to include something important or include something which may put you in trouble. No matter, how big or small mistake you commit while filing the return, any mistake may end up in making you face the audit trial. If there is even a single element of the tax return which you can’t understand, you have the option of taking help from a tax preparation services company for the same.

  1. Not Mentioning Your Entire Income

It is not advisable at all to hide any of your income from the tax department as one can always get penalized for the same. The copy of W-2 AND 1099 forms is received by taxpayer detailing all his/her income for the previous year and even IRS receives the same information. If you fail to list any of the income which is listed on these two forms, the IRS computer will flag your return for sure, eventually leading you to a trial.

  1. Too Much Charitable Donation Claim

It is always good to donate money to charity and it is well appreciated by society and even the government. It is very normal to do so and one should not worry at all if everything is done in a limit. However, when your charitable donation exceeds 3% of your total income, chances of getting your return flagged are high for sure. The key here is to donate to those nonprofit organizations which can give you a receipt for the same. Also, include ‘form 8283’ for all the items having a value of more than $500.

  1. Small Cash Business Enterprises

If you run a small business and deal in only cash or mostly cash transactions, you are likely to face the audit trial. It is very difficult to maintain records for each and every cash transaction and this is the reason, such types of business face a lot of trails every year. One should hire a tax preparation services company if one is finding difficult to deal with the record keeping.

6 Commonly Confused Tax Terminology Breakdown

Most of the taxpayers don’t know about various tax terms when they are going to pay their income tax return for the very first time. Sometimes due to the lack of tax knowledge, they take the wrong decision. Finance and tax is a wide concept and for a layman, it’s very complicated to understand. As Albert Einstein says himself “The hardest thing to understand in the world is the income tax”. A great scientist of the century with an IQ of 160 can say this about tax. You can imagine how difficult it would be for a taxpayer to understand tax.

To those who unfamiliar with accounting practices, some of the tax-related terminologies are indistinguishable. To all who are going to pay their tax in this April, we are going to clear some of the confusion today by looking at 6 confused tax terms. Knowing the difference will not help you when you file, but it will also make you smart and intellectual at the parties.

Tax return vs. Tax refund

It may sound similar and both mean kind of the same thing (giving or paying something back), but when it comes to tax they are completely different terms.

A tax return is a form on which a taxpayer makes an annual statement of income and personal circumstances, used by the tax authorities (IRS) to assess liability for tax. Your taxes are filed when your return is completed and sent to the IRS.

Tax refund, on the other hand, is a refund on taxes paid to an individual or household when the actual tax liability is less than the amount paid. The IRS sends you money if you pay more in taxes during the year than you actually owed.

Simple: your return is basically your financial report that goes to the IRS. Your refund is the money you get back for paying too much in taxes. You file income tax return; hopefully, you receive income tax refund.

Credit vs. deduction

These two above terms is basically good news for your tax.  While both credit and deduction save you money on taxes, but they do it in different ways.

A tax credit is an amount of money a taxpayer is able to subtract from taxes owed to the government. For example, you owe $2000 in taxes for the year, if you have $500 credit, then the amount $500 will subtract from the amount you owed and you will have to pay only $1500. Even better is a refundable credit, such as child tax credit or the earned income tax credit. Even if you owe nothing in taxes, you can claim a refundable credit, which means a bigger refund.

On the other hand, the tax deduction is a reduction of income that is able to be taxed. A deduction goes straight what you earned, not what you owe. Let’s make it easy, if you earned $10,000 over the year, $100 deduction means you’ll only be taxed on $9900 of the money you made. Deductions for mortgage interest, charitable giving, state tax, IRA contributions and medical expenses are some of the ways you can reduce taxable income.

Federal return vs. state return

A federal return provides information so that the taxation authority can check on the taxpayer’s calculation, whereas state return is filed as per income tax laws of the state where you lived during the tax year. If your native and workplace are different, you’ll file a return for each state.

The same goes for living different states during the year: you must file a return for each state. Because every state has different laws governing the collection of income tax, so you have to pay according to the rule of each state. But there are seven states where you don’t have to pay income tax return at all:

  • Alaska
  • Florida
  • South Dakota
  • Texas
  • Nevada
  • Washington
  • Wyoming

So these are some commonly confused tax terms, now you know six tax terms that are easy to confuse and what they actually mean. When you file with www.taxcare.net we guide you each and every aspect of tax. We’ll check all the laws in place for filling in your state so you don’t have to insert the same information two or more times. Whether you are looking for tax preparation, payroll or small business bookkeeping service California, choose Taxcare and get timely and accurate advice that keeps you pace with every-shifting tax requirements.

Key Rules To Make Most Of Your Festive Payroll

Christmas and New Year is on the way, let the last festive payroll of the year go up with fun and cheerfulness. Elf and safety may not be important on your payroll agenda but a simple mistake wastes your festive season. So don’t let your festive payroll go out with a bang.

Future is uncertain and unpredictable, anything can happen. It may sound silly, but fires in the office rise during the festive period and Christmas related injuries can give a serious damage to key people. This could make delivering the final payroll of the year difficult.

Some employers are therefore fearful that allowing their staff to decorate the workplace during the festive period. Health, safety and HR regulations take care of their staff and employees from any danger but merely require you take sensible steps to avoid any risk involved in workplace and approach the task in a safe and practical manner.

The following are golden rules to keep you during the festive season:

• Don’t forget to save your important payroll data somewhere other than the computer you are sitting in. you should have back up for your important data.
• If you’re using hanging decorations then make sure you are using safety and appropriate steps to handle it. Do not climb on the desk or worse still on swivel chairs. Excitement to meet the payroll deadline and enjoy in your office is just awesome, but that won’t happen if you’re at home with a broken leg.
• There is the biggest risk of fire during any festive season, so beware of that. Avoid decoration near light fittings and heaters. A small mistake leads to a serious real fire hazard.
• Make sure Christmas lights are safe and that wires haven’t become detached during storage. There is a chance of losing your important payroll data in an offline file or other vital documents if a fire occurs.
• Cables, Christmas tree, and other decorations can cause trip hazards so be careful that walkways are kept clear.
• Be careful of too much alcohol at the Christmas lunch and party. Don’t drink too much that you lose your control. Keying an extra 10,000 for all employees will make the Christmas joy to them but will not a perfect festival for your business bosses.

If you are looking for the best tax professional in the East Bay, Get the help of a friendly tax expert at Tax Care. We are experienced in understanding your tax situation, particularly if you are looking tax preparation or best payroll services for small businesses.