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

What do Payroll Service Providers Do and When is the Right Time to Outsource?

Outsourcing payroll is usually the
first expansion in a small business.

Q:What do payroll service providers do exactly?

A: Basic services offered include calculating payroll and tax obligations, printing and distributing checks and producing reports. Additional services can include direct deposit, payroll tax filing, issuance of W-2 forms, 401(k) deductions, and tracking of employee benefits.

Q: When is the right time to outsource payroll?

A: It could become obvious one day that the time is right. But if you’re not sure, ask yourself these questions:

1. Are you missing payroll deposit deadlines? If your payroll tax deposits aren’t timely, late deposit penalties can be as high as 10 percent.
2. Are you unsure about your payroll tax calculations? Your errors can be held against you, and penalties can be assessed. 
3. Too many employees? If you have fewer than 20 employees it’s likely that you can save money by outsourcing payroll. Do the math by comparing the hours/cost of your current system and comparing it to the plans offered by a short list of service providers.

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READ MORE>> SmallBusinessAdministration.gov: Five Tips for Outsourcing Your Small Business Payroll Operations

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• GBC Payroll Services' Website   
• About GBC Services
• Payroll Taxes and Your Business
• Helpful Payroll Related Articles

2015 Refund Estimator and 2014 Federal Tax Brackets Table

CLICK FOR TAX CALCULATOR

Q: What is a federal income tax bracket, and how do I find mine?

A: Different levels of income are taxed at different percentages, which vary year by year, and also according to your filing status. Your particular tax bracket will tell you at what rate your income (your taxable income) will be taxed. The rate of taxation is applied only to your taxable income. You can go to a TAX BRACKET ESTIMATOR TOOL and also see a table to determine and understand your tax bracket and tax rate for 2014 and for earlier tax years by clicking on the calculator picture link.

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READ MORE>> efile.com: 2014 Federal Income Tax Brackets, 2015 Refund Estimator

Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
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• GBC Tax Offers Atlanta Experienced IRS Representation
• Essential Financial Services
• Tax Requirements By State
• Visit the Internal Revenue Service's Website
• GBC Audit Services

IRS Updates for Approaching Tax Season

Be prepared for next tax year!

All together, the IRS posted more than 40 updates in 2015.

*These are adjustments to be used for 2015 taxes, to be prepared in 2016, not what you would use to prepare your taxes now from the year that just ended.*

If you want to get a headstart for next year, this is a very good summary. If some of the changes look familiar, it's because they match up with predictions by Bloomberg BNA earlier this year! All taxpayers will see a slight bump in their standard deduction, and the personal exemption amount also goes up.

See upcoming changes in:

• Tax brackets
• Standard deductions
• Itemized deductions
• Personal exemptions

And also:

• Family-related tax item updates
• Education-related updates
• Healthcare and fringe benefit updates
• Federal estate and gift tax updates
• Retirement updates, and more....

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READ MORE>> Forbes.com: IRS Announces 2015 Tax Brackets, Standard Deduction Amounts and More

Call GBC Income Tax Services today at 678-366-9232 for all your tax and IRS needs!
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• GBC Tax Offers Atlanta Experienced IRS Representation
• Essential Financial Services
• Tax Requirements By State
• Visit the Internal Revenue Service's Website
• GBC Audit Services

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>> QuickBooks.Intuit.com: The 8 Most Common Tax Audit Triggers

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•     About GBC Services
•     GBC Audit Services Website
•     Visit the Internal Revenue Service's Website

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

• GBC Tax Offers Atlanta Experienced IRS Representation
• Visit the Internal Revenue Service's Website
• GBC Audit Services