The IRS is struggling on the enforcement front.

  • They are auditing less then 1% 1040s.
  • A majority of audits are for incomes greater then $1,000,000,.
  • BUT incomes between $200,000 and $1,000,000 are part of the target area too.

Here are some red flags that can draw extra IRS attention:

  •       Claiming 100% business use of a vehicle. This is red meat for IRS agents.
  •       Deducting business meals, travel and entertainment on Schedule C.
  •       Writing off a hobby loss.
  •      Deducting rental losses. IRS is actively scrutinizing rental real estate losses, especially those written off by taxpayers who claim to be real estate professionals.
  •      Small businesses are tempting audit targets, especially cash businesses.
  •      Failing to report a foreign bank account. This is a top IRS priority.

Don’t be in a hurry to file your 2013 personal income tax return with IRS. The Service won’t begin processing returns until Jan. 31…10 days later than it had originally planned. Last year’s 16-day government shutdown is the culprit. Don’t expect much in the way of service from IRS this filing season. Budget cuts and a heavy workload have forced the agency to pare back on important services that filers and preparers have historically relied upon. Need help with complicated tax law questions? You’re out of luck. The IRS will answer only basic questions.

Please have patience this Tax Season. Our Government is struggling and we all need to practice  tolerance; continue cooperating through the transition. We are here to assist you in any way we can.

Nick DiBartolomeo,Tax Partner