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Showing posts with label avoid IRS audit. Show all posts
Showing posts with label avoid IRS audit. Show all posts

Wednesday, September 14, 2016

Capital Gains In Your Retirement Accounts

Information about capital gains can be kept in
various ways accurately and efficiently.
When in doubt, ask your tax advisor!
It’s likely that you’ve had some capital gains. 

Most of the information about capital gains comes from brokerage firms where you keep your investments; but, your capital gains in your retirement accounts are generally not reported unless you've started receiving distributions from them. Other information comes directly from you, the taxpayer.

Keep in mind the following facts:

• The tax rates on capital gains are less than the tax rate on ordinary income. Most commonly, they range from a maximum of 15% to zero. There are special types of capital gains that are taxed at 25% or 28%.

• You can take a net capital loss on your tax return, but that loss can only reduce ordinary income, like your wages, by $3,000, and losses in excess of that amount are carried forward to the following year. Married taxpayers filing separately are limited to $1,500 per year.

• Net capital losses that exceed the annual limit are carried forward to the following year and treated as if incurred in that year.

There are other technical details that might only interest your tax advisor, but here’s what the IRS expects:

1. Anything you own, whether it’s for business, for pleasure, or for investment purposes, is subject to capital gains tax. Everything.

2. You must report all capital gains.

3. You cannot deduct and therefore do not report capital losses on property held for personal use.

As the summer heats up and you decide to get rid of the collectibles piling up in your garage or in some rented storage place, as long as you don't make a profit from selling your stuff, there's little chance that the IRS will audit your failure to report your yard-sale operation; but, just remember that the IRS can.

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Wednesday, August 24, 2016

IRS and Small Business Owners IRS Alert

If you run a small to moderate sized company,
outsourcing options as a means to protect your
investments on the in case of IRS prompted audit.

Many small businesses suffer from the misconception that only big corporations have to worry about exhaustive IRS audits. 

Nothing can be further from the truth.


Why?
The Internal Revenue Service utilizes a different set of criteria for evaluating moderate and small businesses, so there are numerous things that can red flag your company for potential governmental scrutiny that are unique to typical mom and pop ventures.

The most common issue  that creates unwarranted suspicion is the filing of numerous tax deductions and exemptions.  Even if such deductions are legitimate, far  too many of them may  give the IRS the impression, mistaken or other wise, that you are playing fast and loose with tax loopholes, shelters and write offs.  To reduce potential risk of an IRS audit in this regard,  you may wish to mitigate the numbers of deductions you indulge, taking due care to keep all receipts  and documents on hand.  This measure may not only keep you from getting audited, but may very well assist in keeping the business in the black should you wind up  being the unwitting participant of  an IRS evaluation.

Another potential problem that may be more specific to smaller and mid sized business is the correspondence audit. 

Moderate sized companies are in greater danger.

Especially this type of review due to the fact that this type of IRS evaluations focus primarily on  red flags that are specific to more diminutive enterprises. In many cases,  this style of audit may not require a face to face meeting and can be disputed in an informal setting.

Another way to keep the tax man at bay is to outsource your major accounting work. Even if you have an in house bookkeeper or a reliable on staff finance team, it is always a good idea to have another pair of eyes evaluating your books. Not only does it guarantee your financial records will be maintained, it allows for pristine record keeping that reduces IRS related inquiry.

Outsourcing may be especially needful if you undergo a correspondence audit and decide to dispute the outcome. 

Even though these kinds of IRS audits are largely handled via snail mail, they can still be costly and problematic to a small company's bottom line when contested.   Companies that routinely outsource with reputable accounting firms will be able to utilize reliable CPA's to represent them in Tax Court. Additionally, the company will be familiar with your company's in house finance paradigm and can utilize this knowledge to assist you in the pursuit of your goals.

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Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
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Wednesday, August 10, 2016

What You Should Know About IRS Correspondence Audits


Many of these  types of audits occur when
mistakes in accounting happen.
Much ado has been made about the fact that IRS audits are on the  decline, however, this  does not mean the IRS can't, or won't, come knocking on your door.  This is especially true if you own a small to mid sized company, as these types of  audits are actually on the rise. 

Correspondence Audits and What They Mean for Your Business

When it comes to IRS related tax audits, large and small business can face two kinds. One is the face-to-face audit.  This particular process is largely handled in person, with the agent and business owner pouring over relevant documentation to assess how much money, if any, a business may owe in  taxes.

The type of audit small to moderate sized companies most often face however, is the called a correspondence audit. As the name implies, this type of  IRS review is generally handled via  snail mail, and can be disputed in lower tax courts. Even so, if handled incorrectly,  a correspondence audit can lead to a  closer examination  of your company's financial  records, which could lead to significant payouts.

This is something a struggling small enterprise can ill afford.

Dealing with a Correspondence  Audit

Correspondence audits usually occur after an IRS agent is alerted to potential issues on the company's tax return.  It could be something as simple as a clerical  error or  missing finance  documentation.  In such instances, an agent will send out an official letter to the business owner requesting further information for clarification.

Now, a correspondence  audit may appear innocuous enough but don't be fooled.   These types of government examinations can be a drain on time and financial resources as you try to get he matter sorted.  Making matters worse, there is usually very little recourse for businesses who receive these types of  notices in the mail, as contact information is seldom supplied.  In other words, you  receive  the notice with on o way to call  or ask questions regarding the  issue.  The only other option  a company will have at this juncture is to request an in office meeting with your local  IRS representative, but this request may or may not be honored--and that's perfectly legal.

How to Avoid a Correspondence Audit

When you receive one of these little bomb shells in the mail, you will have to respond to it by law or face heavy fines or penalties.  Many individuals try to gather the requested info and send it off hoping that will end the matter.  This may not always be the case.

As the old saying goes, an ounce of prevention is worth a pound of cure. Many of these  types of audits occur when mistakes in accounting happen.  Or worst yet, the company's finance department has lost or failed to keep up with pertinent records.

Avoiding this scenario may be as simple as hiring an outside accounting firm to handle your financial record keeping and tax filing. GBC of Atlanta is familiar with ins and out of Correspondence Auditing and related disputes and can act on your company’s behalf. Contact us today to learn more about how to protect your financial investments and remain in good standing with the IRS.

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Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
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Wednesday, July 27, 2016

Tax Season is Every Season : How To Avoid An IRS Audit

What Does The IRS Take Into Consideration
When Performing An Audit?
Did you know that you are more likely to face an audit when Tax Season is in full swing.  In either case, it pays to be ready, no matter what.

Although Tax Season for all officially ends and begins on a given calender day, one mustn’t make the mistake that so many businesses do, by thinking  you are safe from scrutiny  once the season comes to a close.

Remain on Guard

The Internal Revenue Service has a list of things it looks for when considering a business for potential audit. These red flags can pop up for any  reason, at any  time. As this is the case, it remains imperative to  be on the look out for potential  accounting issues, and, when and wherever possible, to outsource with a reputable accounting firm.

Indeed, the IRS can  perform an audit for any reason any day of the week, 365 days a year.


Why?

Having a second pair of professional eyes lowers your risk of IRS investigation, which  all too often approaches a corporate audit with a “guilty  until proven innocent” mindset.

What to Look Out For 

The IRS looks for a wide variety of things that  could potentially clue them in  the idea that you may not be on the up and up, at least in their eyes. When it comes  to intensive government investigations, an uncrossed “t” and undotted “i” simply means payments weren't given to Uncle Sam  in due time, and that can spell trouble for you and your business.  Even so, agents will and often do consider human errors during an audit, but they will often need detailed documentation  to make such determinations—this  is when accurate record keeping becomes crucial.

So, what are some of the things the IRS will take into consideration when performing an audit?  There are quite a few, with the most common being:

Ready and Petty Cash – Businesses that run primarily on cash transactions or  have a lot of petty cash on hand for odds and ends, may garner significant  attention. This is because cash is hard to trace and can easily be hidden or  passed under tables.  In such cases, the IRS may also evaluate your --

Lifestyle and Charity Contributions –   When cash flow is difficult to determine, the Internal Revenue Service will often assess  an individual's social status as it relates to what neighborhood they live in, car they drive, how expensive their clothing  is and even the size of charitable contributions. They weigh these things against the person's assets, inheritances and  the money reportedly take in.  Of course, someone with a sizable income will be able to amass a wealth of creature comforts. If you are pulling in less than 110k a year however, living in Beverly  Hills and buying a Bentley every year should be well out of your price range.

While the IRS uses this assessment as tool in business that deals largely in cash, they can and often employ this methodology in affirming potential tax evasive or mismanagement  for other types of payment based goods and services.

Business Expenses and Reports  – It is not unheard of for  an employee or businessman  to  expense corporate travels, and while even entertainment and meals can be  legally deducted, you have to be able to prove their relation to  company related activity. This is why it is prudent to keep all receipts and documents  on file on the in case they are needed to justify an company expenditure during an audit.

Work Form Home Write Offs  – working from home is becoming more and more common. For business owners who spend a good portion of their time at their residence, they may and can often write off things like their utilities and  internet service.  Individuals  who are tempted to do so however, may  pile on unnecessary deductions in order to receive a hefty  tax return.  Eagle eyed IRS agents  will spot such discrepancies however, and in due time, you may find yourself undergoing an intensive tax audit.

As the above list indicates it is prudent to retain receipts and  relevant forms on the in case  the IRS pays you a visit. The best course of action is to avoid an audit altogether.  One way to do this it  to   stay on top of your accounts, which  is why outsourcing to a reputable finance firm is in you and your companies best interest, all year round.

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Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
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Wednesday, July 6, 2016

IRS Determination : You Have The Right To Contest

Appealing an IRS Determination
Appealing an IRS Determination – Is It Possible?

You've just undergone an exhaustive IRS audit and your worst fears were realized. You owe money. A lot of it. Money you don't even have.  You are now left with plenty of questions  yet not a ton of options.  At this juncture, you may feel inclined to toss your hands in the air, curl into the fetal position and drown out the world, but don't give up just yet.

Businesses, no matter how large or small, have the right to contest IRS determination in tax court.  What does this mean? It means that the IRS decision isn't necessarily final. If you are able to prove your case in court, you could manage to reduce the fees or eradicate them altogether.

Great!  How Do We Start?

How, when and where you present your case is ascertained by the IRS ruling itself, but first and foremost:

Make Sure  Your Appeal is Valid – To  have your  case effectively heard, it must first fall under the rule of law, tax law in particular.  When it comes to  a tax appeal for example, you can't claim an conscientious objection or exemptions based on moral or religious grounds.   After determining  if your case falls within legal parameters, you can either file a claim using tax form 12203 (for cases where a determination of of $25, 000 or lower was made) and presenting it to the tax courts. If the determination was higher than $25,000 dollars, you will need to  file a formal protest, which is a bit more involved.  After all pertinent information if received, the courts will schedule a conference where they'll address your concerns  and assess them for validity.

Know What You Are in For – Disputing a tax assessment is not the same as appealing a civil or criminal case.  One major difference is that you won't see the individual who audited you at this point.  Rather,  an appeals officers will be assigned  to your case and the process will begin with them. Because the appeals officer is unfamiliar with your case and  may not have ties with the agent who audited you,  you could feel as if you'd have a better chance at getting heard and resolving the matter  to your satisfaction.

File Within the Allotted Time Limits – bear in mind that there is a  tiny window of time to appeal the decision, usually  30 days.  If you don't file your appeal  within the scheduled frame, you will lose the right to have your case heard.    The process is informal and can be done via letter correspondence or in face to face meetings. If you fear  you won't have time to address the case, you should consider having someone serve as  representative in your stead.

Hire a Knowledgeable  Representative – In cases where you wish to appeal an IRS ruling, it is best to hire a qualified CPA, Tax Attorney or  Agent  to go over your case and accompany you to hearings.  Someone ill equipped for the job  could end up costing you  your one chance to remove a heavy debt load from your shoulders.  If you decide to let someone speak on your behalf, be sure they have the expertise and know how to present your case well.

At the need of the day, most Americans are unaware that they can  even dispute an IRS audit ruling. If you have been audited recently, now would be to perfect time to claim your right to an appeal.  A step in the right direction would be to hire a expert CPA, such as the ones found at  GBC Income Tax Services of Atlanta.  Don't put your future as risk by doing nothing...start the appeals process and see what you can do to reverse  the decision and  get your business back on the fast track.

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Wednesday, June 22, 2016

Facing the Dreaded Audit By The IRS

The Dreaded IRS Audit - What Actions You Should Take
The IRS has targeted you and your company for a comprehensive audit. 

You've done everything  humanly possible to avoid it, but  your worst fears have been realized. Before you  fling  yourself headlong into panic mode and start checking out real estate in Tahiti, relax. An audit  isn't necessarily the end of the world, especially if you know what to do  in preparation for one.

Great – I am Being Audited – Now What?

An audit can be particularly stressful for  both employer and employees alike.  While the business  owner worries about potentially  being fined, paying exorbitant fees or worse, going to jail, dependent  workers wonder if they could lose their primary source of income should the business go under.
With so much at stake, corporation undergoing a tax audit will need to ensure they have everything on hand to make the process go as smooth as possible.

Gather all pertinent file, records  and documents –this is  the most important aspect of preparedness that cannot be stressed enough. The inability to a locate or present documents  can provide IRS agents with enough fodder to fine   you or claim criminal intent on your part.   Indeed, companies that are able to provide relevant records and books are least likely to face serious consequence after an exhaustive audit.

Do Your Home work – A little research can go a long way in not only helping you feel more secure, but in educating you on what you will need throughout the IRS auditing process. One thing that may surprise you is that the IRS aren't the big evil boogeymen they are made out to be, in fact, they   will and often do consider the fact that employees are prone to human error.  At the end of the day, only a small handful of audits result in serious  citations, fines or arrests.    With that in mind, remember that  they will and often will pursue anything they think to be grossly out to of proportion with the facts presented.

Take a Deep Breathe and – Relax! – The last thing you want to do is raise suspicions that  you have something to hide by acting overly worried. That is not to say pretend everything is A-Okay—just don't get super worked up. Stressing over the matter won't help things anyway, as the best way to ensure you  are going to “beat the system”   is to  do everything in your power  to legally increase the odds of a positive outcome. Seeking the advice of  a well respected accounting firm like GBC Tax Services of Atlanta is one way to  do this.  By outsourcing, you can  go over what needs to be done prior to the IRS agency visit. You  will also be better equipped to ferret out potential problem and solutions before the big day arrives.  In any case, it is always wise to go with  proven experts in the field of accounting  so you know you  you'll be ready when the Tax man comes a-calling.

Once you’ve decided on an expert CPA,  you can have them represent you or be a  part of the process alongside you. In either case, it makes more sense to have a proven and trusted CPA at your side who will help you protect everything you're carefully built. They can also  help you  if you don't like the IRS determination, by taking your case to  tax court on appeal.

But no matter the outcome, it literally pays to do your homework.  Avoid  common business  pitfalls that  lead to  a  negative result after Internal Revenue evaluation by being  proactive on your own behalf. It is the only way to win at life as well as beat tax audits.

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Wednesday, June 15, 2016

What Home Businesses Need to Know About Auditing

Learn What You Can Do To Beat An IRS Audit


The factors that contribute to home business complications primarily concern keeping adequate, substantial records that indicate the influx of money alongside reasonable deductions that won't get you flagged for an audit.

Operating a  small business  can be  productive and exhilarating, but such proprietors  face a bevy of  issues that are unique to  “mom and pop” establishments. Add to this the fact that the company is operating from your home and things get even trickier. 

For instance, writing off  an off-site office as a business expense is a no brainer, as  one can establish the need to pay rent,  electricity, water and any other related  employee housing disbursement.  When it comes to  a home office however, you have to detail, with all due precision, the increments in which one uses things such as  supplies, water, lights,  and even the internet for business related purposes.  Some  may calculate erroneously and in  some cases fraudulently,  so more often than not, writing such things off can and/or  may  lead to an IRS audit.

How Would a Home Business Get Pinged for Audit?

The IRS considers and evaluates a home business  as it would any other,  while being aware of the limitations of such companies.  In other words, the criteria may remain the same but not the methodology  to factor in potential abuses or mistakes in reporting.

DIF Scoring  Rings Audit Bells   –  if there are enough red flags on your tax return, you could trigger what is known as a DIF  (Discriminatory Index Function) flag.  The DIF is a mathematical measurement that weighs  the possibility of audit based on certain income tax filing characteristics. In other words, if too much is out of whack on the form, it will trigger a high enough DIF to provoke an investigation.  This process is utilizes for all types of businesses, but can be problematic for home businesses, where certain nuances, like business expenses and home office space calculations, can be hard to assess properly.  With this being the case, even a mindful home business owner can  land themselves in IRS hot water.

Regular and Exclusive – Another issue, as discussed previously, is duly calculating the home office space, its requirements and  uses.  Getting this precisely right is important, as the IRS determines home office use in its tax audit assessments.  The evaluation  examines how  “regular” and “exclusive” office use is in relation to  home versus business life.  In order for a home office to  establish “office/ work viability” the IRS has to look at how regularly the room is used for business and how exclusively it is used for said business purposes.  For this reason, there are things one can indicate on  one's tax form that could give an agent the notion to investigate the in home set up. This would involve  making sure the small business owner  observed governmental and tax guidelines, like dedicating the space for work alone e.g. no watching Netflix and  having movie nights in the home office.

Examination of 1099 and W2's – a simple yet effective way that IRS agents can assess probable issues is by comparing  1099's or  w2's to the tax documents  themselves. This easy method of matching will tell an agent right away if there are any pertinent discrepancies in income reporting.

Beat the audit by looking for deductions – If you find yourself in the cross hairs of an IRS audit, it may very well pay to look for deductions wherever you can.  Many home business owners do  not now  for instance that they can write off things like utilities  and even business related phones calls.  If you have  relevant records on hand, they may be  able to be used to offset any taxes the IRS may calculate against you.

Locate  a Reputable  CPA – strong credentials  matter, so if your small home business is facing IRS scrutiny, contact a company like GBC Income Tax Service of Atlanta  and learn what you can do to beat the odds and increase your chances of a positive outcome.

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Wednesday, February 24, 2016

Checklist to Prepare for an External Audit

An external audit will protect your
investment and keep your business.
Following is a step-by-step set of instructions intended to aid in the preparation for an external audit.

The guide can also be used for internal audits. Outlined are the planning stage, the entrance interview, fieldwork, the exit interview, and the final audit report phase.

Planning & Preparation:

  • Designate an audit liaison person within your organization who will act as the auditors’ main contact. This should be an experienced person with strong project management and communication skills.
  • Send a general communication to faculty and staff stating that if the auditors contact them directly, they should notify the liaison.
  • Have the liaison develop a list of contacts who must be kept informed of the audit progress.
  • Have the liaison develop a list of people who can provide support on technical issues and gathering documentation.
  • If necessary, schedule and conduct a general training session with individuals who may be asked to participate in the audit either to produce documents, be interviewed by the auditors or participate in findings discussions.
  • Contact auditors and set up entrance conference. Clarify the purpose of the audit and ask that audit requirements be in writing.
  • Alert the internal audit department of the upcoming audit.
  • Make necessary arrangements for the audit team – meeting rooms, preliminary interview schedule, entrance conference specifics including attendees.
Entrance Conference:

  • Develop a list of questions to discuss in the meeting including the purpose, objectives and scope of the audit; the awards to be included and sampling techniques; timelines including beginning and end of fieldwork and expected report date; and communication process.
  • Consider giving the auditor(s) a tour.
  • Determine staffing and space requirements, including whether the auditor will need internet access during fieldwork; arrange for auditor on site space; modify meeting room needs as necessary.
Fieldwork:
  • Obtain the list of requested records and develop an approach for pulling the information on a timely basis. Give a target date for providing records to the auditors.
  • Review the records prior to submission to the auditor. Consider if the records provide the necessary support. Anticipate what questions the records may provoke.
  • Maintain a list of all records provided to the auditor.
  • Meet with auditors at least weekly to learn of the status of the audit and potential issues that are identified.
  • Verify the facts on which issues are based; perform re-calculations and review source documents, if necessary.
  • Communicate at least weekly with those within the organization who need status updates.
  • Liaison should attend meetings between faculty/non-financial staff and external auditors unless the auditor or faculty insist otherwise.
  • Set up exit interview.
Exit Interview:
  • Ask for a copy of each finding or draft report prior to the interview.
  • Based on the nature of the issues, ask representatives from other groups to participate, e.g. general counsel, internal audit, office of sponsored programs, controllers office, etc.
  • Agree on valid findings; negotiate those findings where the facts are not representative of the control weakness.
  • Discuss with the auditor the disposition of the audit issue, i.e. verbal comment, report item, management letter.
  • Escalate any disputed issues to supervisors.
Audit Report:
  • Ask for the final draft report for review.
  • Draft management responses and circulate to management for approval.
  • Understand the follow-up process.
  • Perform a post-audit evaluation to determine weaknesses in the process and potential changes to approach in the future.
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Wednesday, February 3, 2016

Sample Questions for Evaluating an External Auditor

Maximize the effectiveness of your
annual external audit by interaction.
Each year, audit committees should evaluate the external auditor in fulfilling their duty to make an informed recommendation to the Board whether to retain the auditor.

The evaluation should encompass an assessment of the qualifications and performance of the auditor; the quality and candor of the auditor’s communications with the audit committee and the company; and the auditor’s independence, objectivity and professional skepticism.

FOLLOWING IS A LIST OF SUGGESTED SAMPLE QUESTIONS, AND ALSO A LIST OF ATTRIBUTES FOR COMPANY PERSONNEL TO RATE:

*Q1
Did the lead engagement partner and audit team have the necessary knowledge and skills (company-specific, industry, accounting, auditing) to meet the company’s audit requirements? Were the right resources dedicated to the audit? Did the auditor seek feedback on the quality of the services provided? How did the auditor respond to feedback? Was the lead engagement partner accessible to the audit committee and company management? Did he/she devote sufficient attention and leadership to the audit?

*Q2
Did the lead engagement partner discuss the audit plan and how it addressed company/industry-specific areas of accounting and audit risk (including fraud risk) with the audit committee? Did the lead engagement partner identify the appropriate risks in planning the audit? Did the lead engagement partner discuss any risks of fraud in the financial statement that were factored into the audit plan?

*Q3
If portions of the audit were performed by other teams in various domestic locations, or abroad by the firm’s global network or other audit firms, did the lead engagement partner provide information about the technical skills, experience and professional objectivity of those auditors? Did the lead engagement partner explain how he/she exercises quality control over those auditors?

*Q4
During the audit, did the auditor meet the agreed upon performance criteria, such as the engagement letter and audit scope? Did the auditor adjust the audit plan to respond to changing risks and circumstances? Did the audit committee understand the changes and agree that they were appropriate?

*Q5
Did the lead engagement partner advise the audit committee of the results of consultations with the firm’s national professional practice office or other technical resources on accounting or auditing matters? Were such consultations executed in a timely and transparent manner?

*Q6
If the company’s audit was subject to inspection by the PCAOB or other regulators, did the auditor advise the audit committee of the selection of the audit, findings, and the impact, if any, on the audit results in a timely manner? Did the auditor communicate the results of the firm’s inspection more generally, such as findings regarding companies in similar industries with similar accounting/audit issues that may be pertinent to the company? Did the auditor explain how the firm planned to respond to the inspection findings and to internal findings regarding its quality control program?

*Q7
Was the cost of the audit reasonable and sufficient for the size, complexity and risks of the company? Were the reasons for any changes to cost (e.g., change in scope of work) communicated to the audit committee? Did the audit committee agree with the reasons?

*Q8
Does the audit firm have the necessary industry experience, specialized expertise in the company’s critical accounting policies, and geographical reach required to continue to serve the company?

*Q9
Did the audit engagement team have sufficient access to specialized expertise during the audit? Were additional resources dedicated to the audit as necessary to complete work in a timely manner?

*Q10
Did the audit engagement partner maintain a professional and open dialogue with the audit committee and audit committee chair? Were discussions frank and complete? Was the audit engagement partner able to explain accounting and auditing issues in an understandable manner?

*Q11
Did the auditor adequately discuss the quality of the company’s financial reporting, including the reasonableness of accounting estimates and judgments? Did the auditor discuss how the company’s accounting policies compare with industry trends and leading practices?

*Q12
In executive sessions, did the auditor discuss sensitive issues candidly and professionally (e.g., his/her views on, including any concerns about, management’s reporting processes; internal control over financial reporting (e.g., internal whistle blower policy); the quality of the company’s financial management team)? Did the audit engagement partner promptly alert the audit committee if he/she did not receive sufficient cooperation?

*Q13
Did the auditor ensure that the audit committee was informed of current developments in accounting principles and auditing standards relevant to the company’s financial statements and the potential impact on the audit?

*Q14
Did the audit firm report to the audit committee all matters that might reasonably be thought to bear on the firm’s independence, including exceptions to its compliance with independence requirements? Did the audit firm discuss safeguards in place to detect independence issues?

*Q15
Were there any significant differences in views between management and the auditor? If so, did the auditor present a clear point of view on accounting issues where management's initial perspective differed? Was the process of reconciling views achieved in a timely and professional manner?

*Q16
If the auditor is placing reliance on management and internal audit testing, did the audit committee agree with the extent of such reliance? Were there any significant differences in views between the internal auditors and the auditor? If so, were they resolved in a professional manner?

*Q17
In obtaining pre-approval from the audit committee for all non-audit services, did the lead engagement partner discuss safeguards in place to protect the independence, objectivity and professional skepticism of the auditor?

Furthermore, another good way to get well-rounded feedback is to provide a simple questionnaire to the rest of the company staff in order for them to rate their experience. 

Here therefore, is a guide, divided into sections, to help:

OBTAINING INPUT ON THE EXTERNAL AUDITOR FROM COMPANY PERSONNEL 

QUALITY OF SERVICES PROVIDED BY THE EXTERNAL AUDITOR RATING

  • Meets commitments e.g., by meeting agreed upon performance delivery dates, being available and accessible to management and the audit committee.
  • Is responsive and communicative e.g., by soliciting input relative to business risks or issues that might impact the audit plan, identifying and resolving issues in a timely fashion, and adapting to changing risks quickly.
  • Proactively identifies opportunities and risks e.g., by anticipating and providing insights and approaches for potential business issues, bringing appropriate expertise to bear, and by identifying meaningful alternatives and discussing their impacts.
  • Delivers value for money e.g., by charging fees that fairly reflect the cost of the services provided, and being thoughtful about ways to achieve a cost-effective quality audit.

SUFFICIENCY OF AUDIT FIRM RESOURCES RATING

  • Is technically competent and able to translate knowledge into practice e.g., by delivering quality services within the scope of the engagement, using technical knowledge and independent judgment to provide realistic analysis of issues, and providing appropriate levels of competence across the team.
  • Understands our business and our industry e.g., by demonstrating an understanding of our specific business risks, processes, systems and operations, by sharing relevant industry experience, and by providing access to firm experts on industry and technical matters.
  • Assigned sufficient resources to complete work in a timely manner e.g., by providing access to specialized expertise during the audit and assigning additional resources to the audit as necessary to complete work in a timely manner.

COMMUNICATION AND INTERACTION RATING

  • Communicates effectively e.g., by maintaining appropriate levels of contact/dialogue throughout the year, effectively communicating verbally and in writing, being constructive and respectful in all interactions, and providing timely and informative communications about accounting and other relevant developments.
  • Communicates about matters affecting the firm or its reputation e.g., by advising us on significant matters pertaining to the firm while respecting the confidentiality of other clients’ information, and complying with professional standards and legal requirements, including informing us when the company’s audit is subject to inspection by the PCAOB or other regulatory review and sharing the results of the review that are pertinent to the company’s accounting or auditing issues.

INDEPENDENCE, OBJECTIVITY AND PROFESSIONAL SKEPTICISM RATING

  • Demonstrates integrity and objectivity e.g., by maintaining a respectful but questioning approach throughout the audit, proactively raising important issues to appropriate levels of the organization until resolution is reached, and articulating a point of view on issues.
  • Demonstrates independence e.g., by proactively discussing independence matters and reporting exceptions to its compliance with independence requirements.
  • Is forthright in dealing with difficult situations e.g., by proactively identifying, communicating and resolving technical issues, raising important issues to appropriate levels in the organization, and by handling sensitive issues constructively.
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Wednesday, January 27, 2016

Help the Success of the External Audit by Educating Your Professional Team on the Characteristics of Skepticism.

Expect your external auditors to
embrace a professional level of
skepticism in order to succeed.
Skepticism is integral to the conduct of external auditors. But the exercise of skepticism should not be limited to external auditors. Even if not codified in law or regulation, deterrence and detection of financial reporting fraud requires all participants in the financial reporting supply chain to exercise skepticism.

Skepticism is a questioning mindset, and it requires an understanding that even the best organizations can be susceptible to fraud. Management, audit committees, and internal auditors, at a minimum, should take a “trust but verify” approach with systems, methods, and communications rather than accept critical information at face value.

Skepticism is not an end in itself and is not meant to encourage a hostile atmosphere or micromanagement. The word skepticism, in fact, comes from the Greek word skeptikos, which means “inquiring” or “reflective.”

Is skepticism a set of personality traits, or is it a learned skill? The short answer is both. We will consider skepticism as an individual characteristic, albeit with multiple dimensions, listed as follows:

  • Questioning mind—A disposition to inquiry, with some sense of doubt
  • Suspension of judgment—Withholding judgment until appropriate evidence is obtained
  • Search for knowledge—A desire to investigate beyond the obvious, with a desire to corroborate
  • Interpersonal understanding— Recognition that people’s motivations and perceptions can lead them to provide biased or misleading information
  • Autonomy—The self-direction, moral independence, and conviction to decide for oneself, rather than accepting the claims of others
  • Self-esteem—The self-confidence to resist persuasion and to challenge assumptions or conclusions
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READ MORE>> www.thecaq.org: The Fraud-Resistant Organization

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Wednesday, January 13, 2016

Who Gets Audited by the IRS?

Get an External Audit!
Believe it or not, it’s the big fish that get audited more often.

If a Schedule C shows more than $1 million in sales, the odds of being audited rise to 12.1%. If you are in this situation, I would suggest discussing incorporating your business with your attorney and tax professional. This move doesn’t just minimize your audit risk but it also allows you to take advantage of potentially lower tax rates and limits liability.

Here is some IRS data that show the frequency of audits performed in 2012 by return type:

First of all, in 2012 there were more than 143 million individual income tax returns filed, and 1% of these returns were audited that year.

  • When it comes to business returns however, the odds of being audited increase. Many of those 2012 individual returns contained a Schedule C, Income and Expenses for sole proprietors.  Audit risk also rises depending on how much income your business generates. For example, if your Schedule C lists gross receipts under $25,000, your odds of being audited are 1.2%, just a little bit higher than those for individual returns without business income. The odds double to 2.4% when gross receipts exceed $25,000 up to $100,000. Once small business owners bring in more than $100,000 and up to $1 million in gross revenue, their odds of landing in the hot seat increase by 3.6%.
  • When it comes to corporate returns, during 2012, 17.8% of large corporations with more than $10 million in assets were audited. And once assets exceed $20 billion, you can pretty much be guaranteed that you will be audited. In 2012, 415 out of the 446 corporations in this category were audited--that’s 93%.
  • SELF-PREPARED RETURNS ARE TARGETED. There are more than 75,000 pages of tax code. Even tax professionals specialize in certain fields and refuse to take on tax returns or certain types of transactions because of the complexity involved. Once you become self-employed, the ante goes up; there is so much more to know about the tax code, more than can be dealt with through a Q & A session with tax preparation software designed for the individual filer. The IRS knows that there will likely be a lot of mistakes on self-prepared income tax returns that include a Schedule C. Therefore, many of those are pulled for examination.

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READ MORE>> SmallBusiness.FoxBusiness.com: Will Your Business Return be Audited

Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
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READ MORE




Wednesday, January 6, 2016

What the IRS Looks for to Flag for an Audit

Contact GBC Audit Services today.
"The IRS examined 1.1 percent of all individual tax returns in 2010 and 2011, so the chances that your tax return will be audited are only about 1 in 90." -Moneywatch.

That is the good news, but nevertheless it's wise to be prepared, since being chosen for this is an unpleasant experience. Hire external auditors to come and evaluate your company for you and ensure you are taking care of business. Here is a brief summary of how the IRS looks for returns to audit:

The IRS uses a computerized process to check all tax returns for math and clerical errors, such as incorrect Social Security numbers and addresses, and also runs tax returns through a process that compares the information you report from your bank, employer, and W-2, 1099 and other forms and documents. If you omit an item from your tax return, it's very likely to be picked up by the IRS's computers.

A few newer items that can trip up some taxpayers include payments received by businesses from credit and debit cards and investors who report the sale of their investments. These amounts are reported by banks etc and it's important the amounts be accurate. Also, individuals who report gains from the sale of their investments should also take note that the securities industry is now reporting to the IRS the cost basis of investments that were sold as the gross proceeds from the sale.

Meanwhile, the IRS assigns numerical weights to certain tax return characteristics. These weights are added together to obtain a national composite score for all tax returns. When the total score of all selected items on your tax return exceeds the national average score set by the IRS, the agency will flag the return for a possible audit. The exact items the IRS zeroes in on and scoring method is a closely guarded secret, but some of the things the agency is believed to scrutinize include:

  • Large amounts of income not subject to tax withholding 
  • Unusually large amounts of deductions claimed than seem unreasonable when compared to your income 
  • A large number of dependent exemptions claimed that doesn't square wtih reported SSNs, tax withholding allowances and so forth 
  • Large deductions for charitable contributions, casualty losses, home office expenses, and travel and entertainment expenses 
  • Indicating a change of address when not reporting a sale of your residence and not changing your home related deductions

While an IRS audit is not something most sane folks want to go through, it also isn't something to be feared. If you have kept complete and accurate records of all of your deductions and have reported all of your income, you should be fine. In fact, in about a quarter of audits, the IRS makes no changes or issues a refund. Contact GBC Audit Services today to arrange for smooth-sailing this tax season.

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READ MORE>> www.CBSNews.com: "What Triggers an IRS Tax Audit?"

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READ MORE GBC Tax Services Website
For All Your Accounting Needs Call GBC 678-366-9232

Wednesday, October 28, 2015

8 Areas to Focus on to Avoid a Tax Audit

Stay Alert, Stay Aware!
FACE IT; 

you don't have much time on your hands as a small business owner to deal with combing through every aspect of your financial records to avoid an audit.

With the help of a professional CPA, you can easily prepare and avoid pitfalls by being aware of the most common triggers of an audit.

The IRS uses a computer program called the Discriminate Function System (DIF) that analyzes returns and flags them if they are outside statistical norms. When a return receives a high DIF score, an agent reviews it to determine if it should undergo an audit.

Therefore, here are the appropriate areas to ensure are squeaky clean:
  1. IF YOU HAVE A HIGH INCOME: 0.9 percent of people who make less than $200,000 were audited last year, compared to 10.9 percent of those who made $1 million or more.
  2. OUT OF PROPORTION DEDUCTIONS: The IRS uses tables to determine how much is too much for different income brackets when it comes to deductions, although the tables are not made public. For example, an IRS agent will want to know more if you claim charitable deductions that are not in line with your income.
  3. ROUNDING AND AVERAGING YOUR NUMBERS: Most folks appreciate rounding, but when it comes to IRS Agents, they  tend to believe that if you’re sloppy in this area, the rest of your return may not be entirely accurate.
  4. HOME OFFICE DEDUCTIONS ARE TRICKY: The requirements necessary to take this deduction are not relaxed. Many don't know that a portion of a room does not qualify, even if that large corner of your bedroom is taking up space where you don't do anything personal. Click here for the Simplified Option for Home Office Deduction that the IRS came up with last year. And follow the rules!!
  5. IF YOU CLAIM BUSINESSES LOSSES YEAR AFTER YEAR: The IRS may assume you are taking deductions you’re not entitled to in order to avoid paying taxes. They know, for example, that many claim hobby expenses (follow link to read more) as business losses, which is illegal under the tax code.
  6. FILING SCHEDULE C DOES INVITE MORE SCRUTINY: But don't let fear of an audit keep you from claiming legal deductions. Just do it accurately and keep clean records. Or, if you think it may be time to set up your business as a separate entity instead, read more here.
  7. EXCESSIVE BUSINESS ENTERTAINMENT DEDUCTIONS: If you’re going to deduct these types of expenses, you must keep records for each write-off that includes when and where it occurred, who was in attendance, the purpose as it relates to your business, and a record of what was talked about. You’ll also need to keep receipts for expenses greater than $75 when you’re traveling for business.
  8. CLAIM YOUR VEHICLE FOR 100% BUSINESS USE? This will raise a flag. Also, when deducting for business use of a car, you’ll have to choose between the IRS standard mileage rate and actual expenses. Deducting both of these on your tax return will bring the IRS knocking.
So be smart and make sure you consider these issues in your tax records carefully, but then relax, for there is good news: 

The new IRS Commissioner John Koskinen said that last year less than 1 percent of all returns underwent an audit, and only 0.6 percent of business returns (meaning 0.006)!

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READ MORE


Wednesday, October 21, 2015

7 Red Flags to Trigger an Audit: 7 of 7

Be shrewd and hire a good CPA
with external auditing and IRS
Representation experience: GBC
When it comes to audits of your small business taxes by the IRS, we are basically all...

GUILTY UNTIL PROVEN INNOCENT!
*Call GBC Services at 678-366-9232 for immediate assistance*

If you've been chosen for an audit, the burden is unfortunately on you to answer the IRS' questions and to prove anything you claimed. They will be sniffing around aggressively for any unreported or under-reported income, along with over-stated deductions, as that is their job. Excuses of losing paperwork or being unaware will not work. Make sure you're on the ball!

*This is a series of 7 red flags to avoid, to help you not invite an audit. Hopefully you can escape this stress... Here is the final point #7:

*CASH BUSINESSES BEWARE:

*Cash-intensive businesses, such as beauty salons, restaurants and car washes, will always be under closer IRS scrutiny, as they are more likely to under-report taxable income.

To avoid an audit: Beware of warnings, follow procedure, keep good records, hire a CPA, and don't ever ignore tax notices. If you do get audited, be very cooperative and maintain a good attitude with them, and your CPA should be able to handle any IRS Representation for you.

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READ MORE>> www.AmericanExpress.com (from Small Business "OPENForum"): 7 Red Flags That Could Get Your Small Business Audited

Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
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READ MORE

Wednesday, October 14, 2015

7 Red Flags to Trigger an Audit: 6 of 7

Check in next month to learn
about the next red flag to avoid!
When it comes to audits of your small business taxes by the IRS, we are basically all...

GUILTY UNTIL PROVEN INNOCENT!
*Call GBC Services at 678-366-9232 for immediate assistance*

If you've been chosen for an audit, the burden is unfortunately on you to answer the IRS' questions and to prove anything you claimed. They will be sniffing around aggressively for any unreported or under-reported income, along with over-stated deductions, as that is their job. Excuses of losing paperwork or being unaware will not work. Make sure you're on the ball!

*This is a series of 7 red flags to avoid, to help you not invite an audit. Hopefully you can escape this stress... Here is #6:

*CLAIMING 100 PERCENT BUSINESS USE OF A VEHICLE:

*If the vehicle is not designated for business use and there is no separate vehicle available for personal use, the business owner needs to maintain detailed mileage logs and calendar entries for the purposes of each trip.

To avoid an audit: Beware of warnings, follow procedure, keep good records, hire a CPA, and don't ever ignore tax notices. If you do get audited, be very cooperative and maintain a good attitude with them, and your CPA should be able to handle any IRS Representation for you.

--------------------------------------------------
READ MORE>> www.AmericanExpress.com (from Small Business "OPENForum"): 7 Red Flags That Could Get Your Small Business Audited

Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
--------------------------------------------------
READ MORE

Wednesday, October 7, 2015

7 Red Flags to Trigger an Audit: 5 of 7

Check in next month to learn
about the next red flag to avoid!
When it comes to audits of your small business taxes by the IRS, we are basically all...

GUILTY UNTIL PROVEN INNOCENT!
*Call GBC Services at 678-366-9232 for immediate assistance*

If you've been chosen for an audit, the burden is unfortunately on you to answer the IRS' questions and to prove anything you claimed. They will be sniffing around aggressively for any unreported or under-reported income, along with over-stated deductions, as that is their job. Excuses of losing paperwork or being unaware will not work. Make sure you're on the ball!

*This is a series of 7 red flags to avoid, to help you not invite an audit. Hopefully you can escape this stress... Here is #5:

*SHIFTING INCOME TO TAX-EXEMPT ORGANIZATIONS SUCH AS CHARITIES TO AVOID PAYING TAXES:

*This is considered tax abuse. Click here for further understanding (Washington Post).

To avoid an audit: Beware of warnings, follow procedure, keep good records, hire a CPA, and don't ever ignore tax notices. If you do get audited, be very cooperative and maintain a good attitude with them, and your CPA should be able to handle any IRS Representation for you.

--------------------------------------------------
READ MORE>> www.AmericanExpress.com (from Small Business "OPENForum"): 7 Red Flags That Could Get Your Small Business Audited

Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
--------------------------------------------------
READ MORE

Wednesday, September 30, 2015

7 Red Flags to Trigger an Audit: 4 of 7

Check in next month to learn
about the next red flag to avoid!
When it comes to audits of your small business taxes by the IRS, we are basically all...

GUILTY UNTIL PROVEN INNOCENT!
*Call GBC Services at 678-366-9232 for immediate assistance*

If you've been chosen for an audit, the burden is unfortunately on you to answer the IRS' questions and to prove anything you claimed. They will be sniffing around aggressively for any unreported or under-reported income, along with over-stated deductions, as that is their job. Excuses of losing paperwork or being unaware will not work. Make sure you're on the ball!

*This is a series of 7 red flags to avoid, to help you not invite an audit. Hopefully you can escape this stress... Here is #4:

*EXCESSIVE DEDUCTIONS FOR BUSINESS MEALS, TRAVEL AND ENTERTAINMENT:

*Maintain receipts for all expenses, along with detailed records, and don’t overstate these expenses.

To avoid an audit: Beware of warnings, follow procedure, keep good records, hire a CPA, and don't ever ignore tax notices. If you do get audited, be very cooperative and maintain a good attitude with them, and your CPA should be able to handle any IRS Representation for you.

--------------------------------------------------
READ MORE>> www.AmericanExpress.com (from Small Business "OPENForum"): 7 Red Flags That Could Get Your Small Business Audited

Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
--------------------------------------------------
READ MORE

Wednesday, September 23, 2015

7 Red Flags to Trigger an Audit: 3 of 7

Check in next month to learn
about the next red flag to avoid!
When it comes to audits of your small business taxes by the IRS, we are basically all...

GUILTY UNTIL PROVEN INNOCENT!
*Call GBC Services at 678-366-9232 for immediate assistance*

If you've been chosen for an audit, the burden is unfortunately on you to answer the IRS' questions and to prove anything you claimed. They will be sniffing around aggressively for any unreported or under-reported income, along with over-stated deductions, as that is their job. Excuses of losing paperwork or being unaware will not work. Make sure you're on the ball!

*This is a series of 7 red flags to avoid, to help you not invite an audit. Hopefully you can escape this stress... Here is #3:

*UNREASONABLY HIGH SALARIES PAID TO SHAREHOLDERS WHO ARE ALSO EMPLOYEES:

*Determine reasonable salaries for your type of business based on industry, skill level and geographic location.

To avoid an audit: Beware of warnings, follow procedure, keep good records, hire a CPA, and don't ever ignore tax notices. If you do get audited, be very cooperative and maintain a good attitude with them, and your CPA should be able to handle any IRS Representation for you.

--------------------------------------------------
READ MORE>> www.AmericanExpress.com (from Small Business "OPENForum"): 7 Red Flags That Could Get Your Small Business Audited

Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
--------------------------------------------------
READ MORE

Wednesday, September 16, 2015

7 Red Flags to Trigger an Audit: 2 of 7

Check in next month to learn
about the next red flag to avoid!
When it comes to audits of your small business taxes by the IRS, we are basically all...

GUILTY UNTIL PROVEN INNOCENT!
*Call GBC Services at 678-366-9232 for immediate assistance*

If you've been chosen for an audit, the burden is unfortunately on you to answer the IRS' questions and to prove anything you claimed. They will be sniffing around aggressively for any unreported or under-reported income, along with over-stated deductions, as that is their job. Excuses of losing paperwork or being unaware will not work. Make sure you're on the ball!

*This is a series of 7 red flags to avoid, to help you not invite an audit. Hopefully you can escape this stress... Here is #2:

*CONSISTENT LATE FILING OF TAX RETURNS AND PAYMENT OF TAXES: 

*Failing to follow filing requirements and meet deadlines triggers penalties, interest and unwanted attention. Always ask for an extension if you won’t be able to meet a deadline.

To avoid an audit: Beware of warnings, follow procedure, keep good records, hire a CPA, and don't ever ignore tax notices. If you do get audited, be very cooperative and maintain a good attitude with them, and your CPA should be able to handle any IRS Representation for you.

--------------------------------------------------
READ MORE>> www.AmericanExpress.com (from Small Business "OPENForum"): 7 Red Flags That Could Get Your Small Business Audited

Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
--------------------------------------------------
READ MORE

Wednesday, September 9, 2015

7 Red Flags to Trigger an Audit: 1 of 7

Check in next month to learn
about the next red flag to avoid!
When it comes to audits of your small business taxes by the IRS, we are basically all...

GUILTY UNTIL PROVEN INNOCENT!
*Call GBC Services at 678-366-9232 for immediate assistance*

If you've been chosen for an audit, the burden is unfortunately on you to answer the IRS' questions and to prove anything you claimed. They will be sniffing around aggressively for any unreported or under-reported income, along with over-stated deductions, as that is their job. Excuses of losing paperwork or being unaware will not work. Make sure you're on the ball!

*This is a series of 7 red flags to avoid, to help you not invite an audit. Hopefully you can escape this stress... Here is #1:

*REPORTING A NET LOSS IN YOUR BUSINESS FOR MORE THAN 2 OUT OF 5 YEARS:

*You will be well-advised to follow the IRS Publication 535 guide for business expenses, because if a business cannot satisfy three years of profits in a five-year period, it will likely get audited.

To avoid an audit: Beware of warnings, follow procedure, keep good records, hire a CPA, and don't ever ignore tax notices. If you do get audited, be very cooperative and maintain a good attitude with them, and your CPA should be able to handle any IRS Representation for you.

--------------------------------------------------
READ MORE>> www.AmericanExpress.com (from Small Business "OPENForum"): 7 Red Flags That Could Get Your Small Business Audited

Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
--------------------------------------------------
READ MORE

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