Posted by LWM Team on Tue, Aug 17, 2010
IRS Penalties Rise if You Can’t Prove Your Claimed Deductions
The Internal Revenue Service has made it publicly clear that you must show an appropriate paper trail as proof when you claim deductions. There are taxpayers who claim home deductions and medical costs on their tax returns but don’t provide any proof. As far as the Internal Revenue Service is concerned, if there is no proof, it doesn’t exist. Aside from not providing evidence of your deductions, filing late will make the situation worse. Not only will you have rejected deductions, but you will also have a late filing penalty.
Certain deductions are valid such as the cost of medical treatment for the taxpayer and dependents. You may only deduct if the medical costs are more than seventy five percent of your amended gross earnings. The medical costs must not be remunerated by insurance. House mortgage or ‘eligible residence interest’ can be deducted but must not be more than $100,000. Interest is paid during the acquisition of a property.
The kind of information the Internal Revenue Service expects as part of the proof for claimed deductions is dates of payments, amounts of payments, invoices, names and addresses. If it is not included with your tax return it is likely the Internal Revenue Service will disallow those deductions. If you want to make sure you get the deductions entitled to you, you must provide proof in writing. This will also prevent unnecessary delays and appeals on your part but it will give you extra interest, fees and perhaps legal fees.
The weak economy is another reason to urge taxpayers to make sure they get as many tax reductions as possible. It is illegal to claim for false deductions. However, as long as you can show a paper trail of evidence for legitimate claims for deductions you have every chance of getting the Internal Revenue Service to cooperate with your request.
Posted by LWM Team on Tue, Feb 16, 2010
The basic answer to this question is “Yes”. If you even slightly think you may need a tax attorney, it's definitely a good idea to begin doing some research and finding a service that can provide you with one that is very knowledgeable and can answer all your questions right away as well as give you some details about similar cases. Usually the tax attorney will give you an estimate of what you will be able to save if you use their service.
A tax attorney probably won't be needed if you accidentally messed up some tax forms and are more than happy to fix it. They are best suited for people with penalty fees and interest that is accumulating so fast, you simply can't pay it and it begins to affect your life in a negative way. It's very difficult for your average person to talk to an IRS representative in a constructive way that both parties can agree on. A tax attorney provides tax relief for a living and their main goal is to get you great results and get them quickly.
If you are deeply in debt to the IRS, a good tax attorney can sometimes help get your debt settled for pennies on the dollar so you could save thousands or even tens of thousands of dollars in some cases. If your wages are being unfairly garnished, they can also help you get that garnishment reduced to a much more manageable rate.
Most of the time, you will be able to get a free consultation that is free of charge or very cheap so you should take advantage of that and see if this course of action is right for you. A little bit of your time could make a world of difference in your finances.