Unofficial Tax Guide

The majority of working Americans are required to file federal and state tax returns. On the other hand, there are a number of individuals who are not legally obligated to file a tax return.

According to the IRS single individuals with an income less that $7,950 are not required to file a tax return. A single individual is classified as an individual who may live on their own or cannot be claimed as a dependant by another taxpayer. A head of household is an individual who provides the main source of income for an unmarried family or household. An individual who can be defined as the head of the household and makes less than $10,250 a year is not required to file a tax return.

Individuals who are married have the option of filing their tax returns jointly or separately. For married couples who have a combined income less than $15,900 they are not required by the IRS to file a tax return. Married couples who wish to file their tax returns separately are required to make more than $3,100 to legally have to file a tax return. With many individuals and parents working from home or running their own business there are additional rules and restrictions that may apply. It is standard procedure that a self-employed individual does not have to file a tax return if their income is less than $600 a year.

For individuals who do not meet the above mentioned requirements provided by the IRS, filing a tax return is completely optional. According to federal and state laws a tax return is may not be required; however, there are some individuals who may benefit by filing their taxes. These benefits include receiving a tax refund. For an easy and quick way for taxpayers to determine whether they should file a tax return a tax estimate should be completed. Tax estimates can be completed by filling out a rough draft of a federal or state tax form, using a free online tax estimating program such as the one found on TaxEngine’s website, or by using an estimation calculator found on many tax software programs.

When using a program or free service to estimate a potential tax return be sure to consider any potential tax credits or deductions. The Earned Income Tax Credit allows parents to claim their children and they receive a tax credit for it. The IRS lists the standard tax credit as $4,300 for two children or more and $2,604 for one child. Individuals who are not required to file a tax return are still eligible to receive the tax credit; however, the proper tax forms must be filed by the April 15th tax deadline.

Individuals may also determine if they are required to file a federal or state tax return by reading the instruction booklet that comes with most tax forms. Many of these tax booklets have a section that gives important information pertaining to laws or guidelines that may or may not require them to file a tax return.

As previously stated, an individual who does not meet the state and federal requirements for filing a federal or state tax return is not legally obligated to do so. There are a number of benefits to taking the time to estimate a potential tax return refund. Everyone loves receiving money and they should take the appropriate steps to get it if they are entitled to it.

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Each tax season there are a number of taxpayers who are subject to an audit by the IRS. There are some individuals who are randomly audited by the IRS; however, the majority of audits are requested due to a specific reason. Having your personal finances or businesses audited by the IRS is a process that many individuals try to avoid and there are a number of fairly easy precautions that should be taken to avoid a potential audit.

It has recently been estimated that the number of random audits performed by the IRS is on the decline; however, requested audits are actually on the rise for many individuals. There are several reasons why the IRS can request an audit. An audit request is often made when a tax return contains information that raises a red flag to the officials at the IRS.

Self-employed individuals or business owners are often the largest category of taxpayers who are audited by the IRS. You may have seen the constant media attention that has been given to corporate companies who have hidden their profits from the IRS. The truth is just about any individual or business owner can inflate or deflate their profits and even list nonexistent tax deductions. Since untruthful information can easily be reported and commonly is, the IRS uses tax audits to reduce the number of individuals or business owners who are reporting inaccurate information on their taxes for their own benefit.

For self-employed individuals or business owners there are a few important steps that should be taken to reduce the likelihood of being audited by the IRS. A home office is a deduction that is allowed on taxes; however, it is common for an audit to be requested on an individual who claims to have a home office. Self-employed individuals or small business owners need to make sure that each and every item that they are claiming as home office equipment is actually used for the business and only the business.

For traditional independent tax filers, business owners, or self-employed individuals there are a number of steps that everyone can take to prevent a potential audit from occurring. Another reason why an audit may be requested by the IRS is because an extraordinarily large number of tax deductions were reported on their taxes. All individuals or business owners should keep detailed records and the proper documentation of each tax deduction that is being claimed. It is possible for an individual to claim a large number of legitimate tax deductions; however, taxpayers should be prepared to account for them all should an audit occur.

It is also possible for the IRS to request an audit on a tax payer for making an honest mistake. Most mathematical errors are caught and fixed by the tax processing system; however, a large mathematical error may make it look like a taxpayer was trying to avoid paying their taxes. Providing the wrong personal information, including social security numbers and contact information, could likely cause the IRS to look more closely at a tax return. The best way to prevent an audit that may result from a simple and honest mistake is to double check and recalculate all of the important information that is required on a tax form.

The most important step that should be taken to prevent an audit is for a taxpayer to report their full income earned. Although it may seem simple enough there are a large number of individuals who falsely record the amount of income they have received for the year. Whether it is on purpose or by accident there are number of red flags that the IRS notices when reviewing an individual or business tax return. Providing the correct information on a tax return will not only reduce the likelihood of an audit, but it will prevent a tax payer for being fined or facing the possibility of jail if their taxes are audited.

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The majority of audits performed by the IRS can be prevented in one way or another; however, it is possible to be the victim of a random tax audit. Whether the request for a tax audit is random or with due because there are number of ways to prepare for an audit and make the experience is as pleasurable as it can be.

Everyone has heard horror stories concerning the IRS and tax audits. As terrible as those stories may sound the average taxpayer should have nothing to fear as long as they provided accurate information to the IRS. Individuals who feel that they are randomly being audited by the IRS or know that they provided accurate information on their tax returns are able to represent themselves during a tax audit. Some Tax filers who are unsure on how a tax audit works or may have knowingly provided inaccurate information may wish to receive assistance from outside help. The services of a certificated tax preparer, an attorney, or a certified public accountant are often obtained during a tax audit.

There are number of ways to prepare for an audit and make sure that the process moves along smoothly. It is important that all necessary documents and receipts be present and organized in a way that is manageable to sort out and view. This is the one and only way that most taxpayers can prove that their income is exactly as they reported or that their deductions are all legitimate.

An audit is scheduled by the IRS ahead of time; therefore, taxpayers who are being audited have more than enough time to get all of their financial records in order. Preparing important documents and receipts ahead of time will be beneficial in more ways than one. An individual can review their information and familiarize themselves with what will be discussed with the tax auditor. It also gives an individual time to find any important documents that may have been lost or misplaced.

During a tax audit the auditor is there for one reason and one reason only, to make sure that all of the tax information reported to the IRS is correct. Just like every other working American these individuals have a job to do. As intimidating and painful as a tax audit may seem there is no reason to be rude or argumentative during the auditing process. Being kind to a tax auditor is not only professional, but it will help the auditing process go a lot more smoothly.

Ensuring that the information provided on a tax return is correct will likely reduce the likelihood of a taxpayer being audited; however, if audit does occur everyone involved will survive. Despite the common misconception an audit is really not the end of the world. As long as the person being audited is prepared and was honest in their tax return, they can survive this stressful situation.

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