Avoiding A Tax Audit

All taxpayers dread the prospect of facing an Internal Revenue Service audit. According to the New Jersey Society of Certified Public Accountants (NJSCPA), there are some steps you can take to minimize the likelihood that you’ll be audited or ensure a more positive experience if you are.

What’s It All About?

In an audit, the IRS contacts the taxpayer to verify some of the information contained in a filed tax return. The process usually involves a very careful examination of the return. The IRS is becoming more active in enforcement actions. In 2007, nearly 1.4 million individual tax returns were audited, the highest rate since 1998. Audits of businesses jumped 14 percent, to just under 60,000. Among other reasons, the IRS is trying to reduce the tax gap — the difference between taxes owed and taxes actually paid — which the agency estimates is roughly $290 billion.

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Most Workers Will See Bigger Paychecks This Spring

MOUNTAINSIDE―The Internal Revenue Service released new withholding tables that will result in more take-home pay this spring for millions of American workers.

“The new tables, now posted on IRS.gov, incorporate the new Making Work Pay credit, one of the key tax provisions included in the American Recovery and Reinvestment Act of 2009 that became law last week,” said New Jersey’s IRS Spokesperson Gregg Semanick.

“For most taxpayers, the additional credit will automatically start showing up in their paychecks this spring,” said IRS Commissioner Doug Shulman. “Since employers and payroll companies will handle this change, people typically won’t need to take any additional action. The IRS will continue working to implement this and other provisions of the new law as quickly as possible.”

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Beware “Instant” Tax Refunds

ELIZABETH—In a recent enforcement sweep conducted with state officials, the Union County Division of Consumer Affairs inspected 70 businesses in the county that advertised “same-day” tax refunds. Six were later cited for failing to disclose that the advertised service was actually a high-interest loan.

The deceptive advertisements appeared in storefront signs, posters, and flyers. They included the words “instant” or “same day,” or they specified a time frame such as “1-Day” or “2-Day.”

It’s not possible for the IRS to process a taxpayer’s return and issue a refund that quickly. The quickest refund takes at least eight days. That occurs when the taxpayer submits an electronic form to the IRS, and the refund is direct-deposited to the taxpayer’s bank account.

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EITC Could Be Financial Lifeline To Many New Jerseyans

MOUNTAINSIDE — The Internal Revenue Service and New Jersey community groups are promoting Earned Income Tax Credit (EITC) awareness.  This tax credit could be a critical financial lifeline to many Americans this year.

Last year in New Jersey, over 498,000 filers received over $956 million from EITC.  The average EITC amount in New Jersey was $1,920.  Nationwide last year, nearly 24 million taxpayers received approximately $48 billion from EITC. The average EITC amount was $2,000.

“Difficult economic times may mean more people are eligible for EITC because of reductions in their income last year. The amount of the EITC, the government’s largest tax benefit program for working families and individuals, is determined by earned income and family size,” said New Jersey’s IRS Spokesperson Gregg Semanick.

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Mailbox Fraud Still A Concern In Computer Age

ELIZABETH—With tax season approaching, Union County residents can expect a stream of official-looking envelopes in their mailboxes. Most contain authentic documents, but some “look-alike” mailings have been identified as a source of junk mail, scams, and serious fraud.

“The public is becoming more alert to internet fraud, but we should all be mindful that hucksters and thieves still use the mailbox,” said Freeholder Chairman Alexander Mirabella. “If you think you’ve received look-alike mail, call our Office of Consumer Affairs and check it out.”

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Know Your Tax Exemption, Deduction Options

By Jason Alderman

About the only upside when the cost of living increases is that every year the IRS readjusts personal tax exemptions, standard deduction amounts and retirement account contribution limits. It’s not like winning the lottery, but I’ll take all the good news I can get.

Among the changes that might help your tax situation in 2009 are:

Exemptions and deductions. The personal federal tax exemption you may claim for yourself and dependents increases $150 to $3,650 each in 2009. The standard tax deduction for singles increases to $5,700 (up $250 from 2008); for those who are married and filing jointly, it’s now $11,400 (up $500); and for heads of households, it’s $8,350 (up $350).

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IRS Has $6.98 Million in Undelivered Refunds & Stimulus Payments For New Jerseyans

MOUNTAINSIDE — The Internal Revenue Service is looking for New Jerseyans who are missing 6,351 economic stimulus checks totaling about $3.82 million and 2,929 regular refund checks totaling nearly $3.16 million that were returned by the U.S. Postal Service due to mailing address errors.  The average undelivered stimulus payment is $602 and the average undelivered regular refund is $1078. In some instances, a taxpayer may have both an undelivered stimulus payment and a regular refund. The IRS provided a list [PDF format] of residents with undeliverable checks whose last known address was in our readership area.

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IRS Offers Tax Credit to Aid First-Time Homebuyers

MOUNTAINSIDE— First-time homebuyers should begin planning now to take advantage of a new tax credit included in the recently enacted Housing and Economic Recovery Act of 2008.

Available for a limited time only, the credit:

 

• Applies to home purchases after April 8, 2008, and before July 1, 2009.
• Reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar.
• Is fully refundable, meaning that the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax that they owe.

 

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Elizabeth Offers IRS Assistance

ELIZABETH – IRS-trained volunteers will provide free assistance to city residents interested in applying for the federal government’s economic stimulus package.

Economic stimulus payments are available to individuals with income over $3,000 in 2007 from earnings, Social Security/Railroad Retirement benefits and/or Veterans Disability benefits.

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