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Who does your taxes? Have you ever been audited?


geminibear
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TurboTax.

 

Everyone who works for the IRS is audited. I was told that it was unusual for no changes to be made as a result, but with a most of the period audited spent in law school and a small amount of W-2 income, my tax situation was simple enough that it would have taken talent or chutzpah to report it incorrectly.

 

I roll my eyes every time anyone suggests that one benefit of the cash nature of escorting is the ability to avoid paying taxes on one's income. It makes it easier. It doesn't make it legal or right.

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Once I started pursuing a (turned out to be money-losing) side business/hobby, I paid

to have my taxes done by somebody else. The first guy (who had been an enrolled agent)

never made any mistakes.

 

The second guy made a couple of mistakes in twenty years resulting in letters but not audits

(the second guy is a tax lawyer currently certified to practice in the state of california, passed

the BAR exam ...).

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I have done my own, with computer software and I have had hired a CPA. The last few years I hired a CPA, but may go back to doing it myself next year.

 

I have not been audited but I declare everything so while I wouldn't like it, I don't live in constant fear of it. The IRS catches up with many people who evade at some point. It might not be today, it might not be tomorrow... but they are going to get you at some point.

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I have a pro do them so she can help me if audited, which I have been. Having living arrangements in separate cities or rental property seems to be an automatic red flag for some state and city tax authorities. I've had the pleasure of dealing with both the city of New York and NY State departments. :( Lots of paperwork and administrative headaches. Fortunately, I'm squeaky clean but they do look at you with a microscope. Glad my accountant is even more meticulous and paranoid than I am. Love her! :)

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When it comes to outside income tax preparation I learned the following years ago:

1. Enrolled Agents - they are the best. They are former IRS agents or individual who have passed two days of exhausting testing on tax law and tax forms. They can practice in tax court but usually prefer to have a tax lawyer accompany them

2. Tax Preparers - they are familiar with and understand the forms. They cannot practice in tax court.

3. Tax Lawyers - they know tax law. However they are frequently inept regarding tax forms.

4. CPA's - they are glorified book keepers. They frequently know neither tax law or tax forms.

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I always do my own! I have had two accountants over the years and there were errors when the first guy did it so I changed. Then I would do it all myself and hand everything to the second guy and he would confirm that what I did was correct. So it was a waste of $$$$. I have been doing it myself ever since. First longhand with a calculator and now with H&R Block's computer program. Only once did I make a mistake and that was in the pre-computer days, and that's a good record because I was self employed and had to file Schedule C etc.

 

Only three times was I questioned by the IRS regarding some business related forms and I knew that I was right and they were wrong. I held my ground and was firm with them. Once a simple phone conversation solved the matter, another time a simple letter. Only once did it drag on for months, but in the end they said, "Never mind"!

 

As long as you have a reasonable argument when dealing with the IRS you usually can stand you ground.

 

Finally.... EVERYBODY SHOULD DO THEIR OWN TAXES, OR AT LEAST UNDERSATND THE SYSTEM. IF MORE PEOPLE DID I WOULD BET THAT THE TAX LAWS WOULD BE CHANGED AND SIMPLIFIED SOONER RATHER THAN LATER!

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I tried one of those Turbo Tax things several years ago and it didn't pick up on a RMD from an IRA, or similar.....

 

a guy described as a "genius" by other clients has done my simple taxes for years...he is very cool and low-key....$150 for fed and state is sorta up there, but worth it very much to me....all that foreign taxes, cap gains (ST and LT), blah, blah.....it all comes to me laid out, printed up, sign here, and we're done...of course, the prep work I have to do ahead of time FOR HIM (!!), hmmmm

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I have always done my own taxes, as they are simple. When I lived in Illinois in the mid-'80's, the State rejected my income tax form every year. My final tax "audit" said that I owed $4.xx. I re-checked my form and their critique, and could not duplicate their efforts.

 

I wrote them a reply to that effect, noting, "Do you realize how much this is costing each of us, everytime we exchange letters?" They stopped at that point.

 

I do have a story of overpaying my Social Security, and the IRS demanding that they owed me a refund ... with 8% interest, compounded, for three years.

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Early in my teaching career I was audited by the IRS for deducting 100% of a foreign trip. I was teaching world history at the time. My enrolled agent, who I gave power of attorney to represent me at the audit, requested that I prepare a justification of the deduction. When I presented it to her she burst out laughing. I asked what was wrong, she said absolutely but she seldom received such a detailed fifty page document justifying a deduction. She even when so far to ask if she could make copies to show other tax payers how to prepare to confront the IRS. On the day of the audit she called me at school and asked if I would accept an IRS proposed settlement of a 60% deduction. I requested that she tell them I would see them in tax court. A few minutes later she called back to say that the IRS wanted to know what settlement I would accept. I asked that she tell them I would accept a 90% deduction by conceding that I spend 10% of my time shopping. The IRS accepted. Latter I asked her why the IRS conceded so quickly. She then informed that precedent is not a part of federal tax law and that IRS agents decided based upon the presentation of the individual tax payer whether or not to pursue the case in court and that they weren’t overly anxious to face a tax payer in court who had prepared a fifty page detailed justification for the deduction. However, if another tax payer made a weaker case for an identical dedication they would go to court.

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I have paid income taxes for 56 years, and until a couple of years ago I did my own, always doing the calculations myself. When my partner and I got married, I decided I couldn't do our joint filing--he had a tax accountant who had handled his much more complicated financial affairs for thirty years. Now we have a tax accountant whose specialty is same sex married couples, so we hand all the documents to him and let him figure it out.

 

Neither of us has ever been audited by the feds, but I still periodically get a notice from the New York State tax office saying they are still looking into a dispute I had with them over some income I earned in NYC in 2002. Four years after I moved to California, the City of Philadelphia informed me that I owed them back taxes on a small amount of money I had earned in New Jersey over six years, which I had erroneously believed was not subject to Philadelphia income tax (everything is subject to Philly tax!).

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I forgot to mention one confrontation that I had with the IRS regarding my dad's tax return when he was well into his eighties. I recall picking up his tax return from his accountant. I glanced at it and immediately said that something seemed wrong. The accountant in no uncertain terms said that it was absolutely correct.

 

Well my dad subsequently got a notice from the IRS saying that he owed an exorbitant amount in the thousands! I realized that the IRS had calculated a worst case scenario. I figured out the correct amount which was a few hundred instead of thousands. I sent the IRS that amount. They accepted it. End of story!

 

Needless to say I did my dad's taxes from then on.

 

Lesson to be learned: Never hire an accountant who has been diagnosed with Alzheimer's and is in denial...

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I was audited in 1992 and was told i owed 18000 in taxes. I went to the audit and after four visits we were down to $278 dollars. I received a letter in the mail and expecting it to be a statement, was shocked to see I was being audited for 1993. I was said to owe $16000. I went back to the audit and was able to justify the deductions they had eliminated and more and I wound up being owed $36 and as it turns out, a deduction I took in 1993 should have been spread out over a 3 year period, which lowered the taxes from 1992 to $17 dollars. I signed off on both of these, and received a check for 36 dollars and paid the 17. A few months later, I was audited for 1994. Again with a multithousand dollar debt. I went to the IRS and said that they were harassing me and that I should not be audited three years in a row. As it turns out, that only pertains if you do not have to pay additional taxes. So that 17 dollars, led to my being audited again. By this time, I had been to the local office so many times that I was known by name. The IRS is not the kind of place where everybody should know your name. "NORM" Anyway, the third year was reviewed, the issues were the same and the audit was deemed unnecessary. It took a lot of effort, but it was much better than paying almost $50000 that the IRS would have tried to get.

No audit since. Stopped doing my own taxes soon after 1994, as I had opened my own business and had my accountant do the taxes.

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One more thought... I used to have a neighbor who was an IRS agent. He said that he was a bastard at work, and I believe it as he was the most rotten neighbor imaginable. Nobody in the area dared step on his property, even the neighbor who was a State Police Captain! Yet, I did know an IRS agent who was a peach of a guy and seemed as though he would be very fair and understanding.

 

I once took a course about what is safe and not safe to deduct. The bottom line seemed to be that if you had a reasonable argument for taking the deduction that chances were that the IRS would go along with it. Of course the lecturer said that once a client deducted a SCUBA diving vacation saying that wearing the mask would give him a better understanding regarding what a patient would feel when given sedation. It all sounded far fetched to me, but the IRS bought the argument. However, I would not suggest anyone pressing their luck with it! Hardly!!!!!

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Bless all of you who hire a tax person.

 

I just closed my office for the night. I threw out 5 people today who walked in with questions but didn't want to pay for a consult. Hmmm, do you work for free? Grrrr.

 

As an enrolled agent, I do a great deal of research and ALWAYS exceed the IRS' required continuing education requirement. That's just my way.

 

The rest of tonight is for train wrecks who want me to lie for them or want to bargain at the 11th hour. Seriously? I up-charge new clients on the last day if they have played the "avoid" reality game. Sooo over it.

 

Had a guy walk in with 3x my earnings asking questions on his own pen and paper return. I quoted him my consult price, he had the balls to say "you charge for that?". Ugh yup. I showed him the door.

 

My regular clients returns have been done for over a week. Some like the " excitement " of filing on the last day. Sigh. I humor my regulars. This week is all about train wrecks and new folk. Last minute referrals I treat like gods, future billing. Walk ins and "free" help my receptionist shows the door. If they give her a hard time, I throw them out. My receptionist rocks and I'd carry her child to term if she asked me to. I suspect she's sipping from the bottle of Tully I handed to her when we locked the door tonight. Yes, I bought it for her. (For you sketchy bitches who may have wondered ;) ).

 

So, in closing, an enrolled agent knows taxes. A CPA may know taxes, but I don't trust them unless he/she offers free or fixed rate audit support and at least 1 free consult per year.

 

Hope non of you get love notes from a taxing authority. :)

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Yeah, the foreign tax credit is a bitch. Way too complex especially if you have a lengthy 1099-DIV.

 

Kevin Slater

Oh my, I do 1116s in my sleep. Then again, I don't have 8 inches to offer my clients. It's all about the client experience and the quality of the service provider. ;)

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I've paid someone to do my taxes since the 1980's. But in the mid '90's I moved and decided to try Turbo Tax. It told me I owed $5,000 (which I didn't have) so I filed for an extension. Never got around to it and didn't file for 3 years. Eventually took all my info to a local professional. He found I was owed a refund for all those years so no penalties or interest.

 

Went back to my original guy who is an enrolled agent. Other than 3 years, they've done all my taxes and I've never been audited. I doubt I'll ever do my own taxes. This year, for example, I paid taxes in 3 states, earned income in 2 states, sold property in 1 state, and was relocated by my company to San Diego. This is way too complicated for my simple mind. Don't mind the money I spend to get my taxes done. And, I often do this via e-mail. But, I actually met face-to-face this year but usually do things without ever visiting their office in Utah.

 

God bless the people that have the understanding and patience to deal with the IRS.

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It depends on the situation. During years when I only have 1 job and I rent, I do it myself (straightforward through TurboTax or HR Block, whichever is doing a promo). Last year, I did plenty of freelance work (on account of getting laid off), so I paid someone to do it for me.

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Everyone who works for the IRS does not get audited, although I was audited more than 20 years ago for an item on Schedule C. There was no change. My Schedule C income is less than $5,000 so I use Schedule C-EZ now, always have a small profit, and haven' t been audited since.

 

I've always done my own taxes.

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