Income Tax Preparation Tips

FinanceTax

  • Author Alfred Bart
  • Published February 21, 2010
  • Word count 566

To qualify as a business under the fact and circumstances test you need to keep very professional and organized business records. It is good to have formed your business as an entity like an LLC, and to abide by all of the rules pertaining to that entity. To qualify, you should work a regular amount of hours at your business. They will not consider you a business if they believe that the nature of your business is overly pleasurable or fun. They may also audit you to determine if you are operating a business or enjoying a hobby.

The exceptions to this rule are cash receipt businesses. If you own a business that deals with a lot of cash, like a corner grocery or a car wash, your chances of getting audited can jump well beyond 10%. You see, the Internal Revenue Service starts out assuming that we are all tax cheats and moves on from there. Now, you might not get audited right away, if you own one of these businesses, but the IRS could be monitoring you very closely. For instance, if you own a laundry, it is not unusual for the Internal Revenue Service to monitor your water usage in order to determine revenue.

You can deduct gambling losses on schedule A of your income tax return. This deduction is limited to the amount of gambling winnings you took in at the casinos. In other words you cannot report that you lost more than you won. I know that sounds unrealistic to any of us who have ever gambled, but there it is. The IRS has a really good interactive website. The site bristles with information. The home page is constantly updated with everything from tax tips to information on current hot button issues. Where it really shines is in providing information to the taxpayer. You can research any tax issue and find any form, no matter how obscure, on the IRS website.

Although there is a particular deduction for theft and casualty on schedule A, there is an allowable miscellaneous deduction for casualty and theft of income producing property. The causes of loss could be fire, theft, storm, or vandalism. Income producing property can be art work stored for investment, stocks, bonds, coin collections, etc.

No matter which methods of online income tax preparation you choose, filing online provides an easy way to complete your taxes. You can file from the comfort of your own home, and will likely save on your tax preparation bill even if you opt for paid tax services online. Companies that specialize in online tax preparation often charge less because they don't have the usual overhead of an office building. Advertising their online service is certainly less expensive than marketing for a brick-and-mortar tax office, and their customer base can be substantially larger due to the broad reach of the Internet.

What you need to know in order to guard against this scam is that the Internal Revenue Service never initiates contact with a taxpayer by email. They will always send mail via the U.S. Postal Service. So, any email that you receive which purports to be from the Internal Revenue Service is fraudulent. Delete it quickly from your mailbox. Do yourself a favor and do not open it. Some other scams incorporate malicious files and viruses into emails disguised as correspondence from the Internal Revenue Service.

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