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June 2019 Archives

IRS letters aren't necessarily audit notices

Georgia residents and taxpayers throughout the country could receive notices from the IRS at any point during the year. In many cases, it is merely the government reaching out to notify a taxpayer about an adjustment made to his or her return. Taxpayers have the opportunity to dispute the adjustment by sending in additional information to support his or her claim. Notices such as the CP 2000 letter could be sent because an individual forgot to claim interest income on a return.

3 ways your business may become a tax headache

Starting a business is often an effective way to realize the American dream. After all, not only does a small business give you both flexibility and income, but a successful one may also provide you with something to leave your children. You do not want your business to turn into a tax headache, though. 

Common audits caused by investment income

There are a variety of reasons why the IRS may decide to audit a Georgia resident's tax return. However, most audits are triggered because something on a return seems unusual based on the income a person has reported. For instance, if a real estate investor writes off a high amount of mortgage interest, that could be suspect given that interest rates are relatively low. It is important to include dividends, interest and capital gains accrued during a given year.

The IRS is increasing 'hobby loss" audits

One of the benefits of owning a business is the ability to take deductions for expenses that are legitimately used in an effort to produce income. Some Georgia businesses end up in the red where expenses exceed income for the particular tax period. If this occurs regularly or in an excessive amount, the attention of the IRS may be triggered. The issue that may arise is the determination of whether the enterprise is in fact a for-profit business or if it is more of a hobby, for which losses cannot be deducted.

Fewer top earners are being audited by the IRS

According to ProPublica, taxpayers in Georgia who make less than $20,000 a year may face the same chance of being audited as those in the 1% of top earners. In many cases, low-income individuals face audits because they claimed the Earned Income Tax Credit (EITC). The EITC audit process is automated, which makes it easier for the government to perform in a timely manner.

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