In past years, we have seen an increase in individual tax audits. The most recent statistical data released by the IRS for the tax year 2010 shows that during that year, more than 1.58 million tax returns were examined by the IRS, focusing on more high-income taxpayers than ever. Audits of individuals with income of $200,000 or more increased almost 6% from 2009, while audits of individuals with income of more than $1 million increased almost 15%.
To avoid the risk of an audit, many of our clients tell us to not include anything on their tax returns that could be a “red flag” to the IRS. As a firm, we believe if you are eligible for the deduction then you should take it. For example, if you gave a lot more to charity this year than you did last year, then you should take the additional deduction. Likewise, if you were ill or hurt in an accident and had a large amount of medical bills, you should be entitled to the deduction on your return. If you save good backup—actual, legible receipts—for your deductions, you should not worry about getting a tax notice requesting to see your documentation.
On the other hand, when we ask some individuals how much they contributed to charity last year, they tell us to take the maximum deduction allowed. This is not the way it works. You are not “allowed” anything. You are allowed to take the amount of the deduction that you made. These are the people that should be worried more about the increase in audits as they obviously are not relying on their records, which they have kept during the year in order to give us their year-end numbers for their returns.
Responding to a Notice
Responding to even the simplest IRS notice can be time consuming and stressful. Also, answering the notice incorrectly can end up costing you months or even years of sending letters back and forth with the IRS. We frequently assist our clients in dealing with these matters and reconciling any differences between the taxpayers and the tax agency.
The resolution process can involve phone calls, correspondence, meetings, preparation of additional filing forms or a combination of these actions. It should not come as a surprise that all of the items can take quite a bit of time and result in a substantial invoice for our services.
In response to this dilemma, Henssler Financial’s Tax and Accounting Division is offering our clients the opportunity to prepay for audit services for federal or state income tax returns. Enrolling in this program yields you five hours of prepaid audit representation and services, which can be used for one of our expert Tax Consultants to respond to IRS correspondence, or for one of our Tax Consultants to attend a meeting with the IRS on your behalf.
You can enroll your individual returns in this program as well as your business returns. We also have options where you can enroll for a single tax year or you can enroll for all open tax years. The cost of enrolling in this program for one tax year is $175 per Social Security number or Employer Identification number covered. If you are a joint filer, the $175 fee covers both you and your spouse.
The cost for all open tax years is $525 per Social Security number or Employer Identification number covered. If you enrolled today, this would cover tax years 2009 through 2011 with 2008 included at no charge. If you enroll more than one Social Security number or Employer Identification number, you will receive a 15% discount for each additional one you add to the program.
Our intention in offering this program is to give those clients who may be concerned about representation costs the option to secure what we hope would be an adequate block of time to resolve such matters. We hope this will give our clients confidence in sending us the tax notices they receive and peace of mind that they have us working for them in order to resolve any outstanding issues.
At Henssler Financial we believe you should Live Ready, which includes taking advantage of the substantial savings offered if you are concerned about being in the IRS’ target demographic for audits. If you have questions regarding your tax return, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or e-mail at experts@henssler.com.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
