How To Avoid An Audit By The Internal Revenue Service Part Two
Another thing that makes the Internal Revenue Service wary is hobby losses. Last year the Internal Revenue Service handed its agents a manual about how to find hobby losses, which is when tax payers underwrite activities they enjoy – like soccer – by labeling them as businesses and claiming a loss on a Schedule C under the guise of self employment. Remember that any Schedule C that lists a loss will be under scrutiny, especially if your new business has something to do with anything enjoyable or fun.
Although there is nothing wrong with doing your own tax return, if you hire the help of a tax preparer, make sure that they are on the up and up. The Internal Revenue Service has pretty much come out and said that it keeps a list of tax professionals that they find wary, but they will not tell you who these people are.
So always keep in mind that using a tax preparers who claims that they can get you bigger refunds than others, takes their fees out of a cut of the refund, or suggests that you do anything that may seem shady is not a safe idea, no matter how enticing their promises or suggestions may sound.
And although this may seem obvious to you, many people still do not get the fact that you can’t claim that you do not owe taxes because the tax system is voluntary, or you have a Fifth Amendment right against filing self-incriminating tax returns. The Internal Revenue Service will simply add penalties to the money you already owe because these are considered “frivolous arguments,” and the courts will support its decision.
Finally, even if you do manage to pull the wool over the eyes of the IRS, don’t go around bragging about it. Something that a lot of people don’t know is that the IRS is now authorized to pay snitches a lot of money to rat you out!
Mallory Megan works for Rapid Recovery Solution and writes about commercial collection agencies.
