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Red Flags for Tax Auditors

 

No one wants to see an Internal Revenue Service (IRS) tax auditor show up at their door. In 2018, the IRS budget is roughly $1 billion less than it was 8 years ago, down from $12.1 billion in 2010 to $11.2 billion. And even though the number of audits has dropped 40 percent from 2010 to 2017, an IRS tax audit remains a fear for many individuals.[i]

 

The IRS can’t audit every American’s federal tax return, so it relies on guidelines to select the ones most deserving of its attention. Here are six flags that could make your tax return ripe for an IRS audit.

 

The chance of an audit rises with income. According to the IRS, less than 1% of all individual taxpayer returns are audited. However, the percent of audits rises to over 1.5% for those with incomes between $200,000 and $1 million who attach Schedule C and is over 4% for those making more than $1 million annually.[ii]

 

If this year’s 1040 deviates greatly from last year’s, that could raise a red flag. The IRS has a scoring system called the Discriminant Information Function (DIF) that is based on the deduction, credit, and exemption norms for taxpayers in each of the income brackets. The agency does not disclose its formula for identifying aberrations that trigger an audit, but it helps if your return data is within the range of other taxpayers with similar incomes.[iii]

 

If your business passes for a hobby, you could be scrutinized. Taxpayers who repeatedly report yearly business losses on Schedule C increase their audit risk. In order for the IRS not to consider your business as a hobby, it typically needs to have earned a profit in three of the last five years.2

 

Not fully reporting your income boosts the chances of an audit. The IRS receives copies of all of your 1099 and W-2 forms. Individuals who overlook reported income are easily identified and may provoke greater scrutiny.2

 

Alimony discrepancies between exes can raise eyebrows. When divorced spouses prepare individual tax returns, the IRS compares the separate submissions to identify instances where alimony payments are reported on one return, but alimony income goes unreported on the other party’s return.2 Keep in mind that The Tax Cuts and Jobs Act repealed the alimony deduction after December 31, 2018.

 

If you claim rental losses, you had better be a real estate professional. Passive loss rules prevent deductions of losses on rental real estate, except in the event you are actively participating in a property’s management as a developer, broker, or landlord (the deduction is limited to $25,000 and begins to phase out when adjusted gross income exceeds $100,000) or you are devoting more than 50% of your working hours to this activity. This is a deduction to which the IRS pays keen attention.2  

 

To learn more about CapSouth and the services we provide, call our office at 800.929.1001 or visit our website at www.capsouthwm.com

 

CapSouth Wealth Management – Dothan, AL, Atlanta, GA, McDonough, GA, Charlotte, NC

 

The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

 

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

 

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

 

[i] https://www.washingtonpost.com/business/economy/your-chances-of-an-irs-audit-are-way-down-but-keep-it-on-the-up-and-up/2018/04/06/cb6c5794-3779-11e8-9c0a-85d477d9a226_story.html?utm_term=.77485a954004

 

[ii] https://www.kiplinger.com/slideshow/taxes/T056-S001-red-flags-for-irs-auditors/index.html

 

[iii] https://www.cpapracticeadvisor.com/news/12418908/how-to-prepare-your-clients-for-an-irs-tax-audit

 

Trends in Charitable Giving

According to Giving USA 2019, Americans gave an estimated $427.71 billion to charity in 2018.

Americans give to charity for two main reasons: to support a cause or organization they care about or to leave a legacy through their support.

When giving to charitable organizations, some people elect to support through cash donations. Others, however, understand that supporting an organization may generate tax benefits. They may opt to follow techniques that can maximize both the gift and the potential tax benefit. Here’s a quick review of a few charitable choices:

Direct gifts are just that: contributions made directly to charitable organizations. Direct gifts may be deductible from income taxes depending on your individual situation.

Charitable gift annuities are not related to annuities offered by insurance companies. Under this arrangement, the donor gives money, securities, or real estate, and in return, the charitable organization agrees to pay the donor a fixed income. Upon the death of the donor, the assets pass to the charitable organization. Charitable gift annuities enable donors to receive consistent income and potentially manage taxes.

Pooled-income funds pool contributions from various donors into a fund, which is invested by the charitable organization. Income from the fund is distributed to the donors according to their share of the fund. Pooled-income funds enable donors to receive income, potentially manage taxes, and make a future gift to charity.

Gifts in trust enable donors to contribute to a charity and leave assets to beneficiaries. Generally, these irrevocable trusts take one of two forms. With a charitable remainder trust, the donor can receive lifetime income from the assets in the trust, which then pass to the charity when the donor dies; in the case of a charitable lead trust, the charity receives the income from the assets in the trust, which then pass to the donor’s beneficiaries when the donor dies.

Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional who is familiar with the rules and regulations.

Donor-advised funds are funds administered by a charity to which a donor can make irrevocable contributions. This gift may have tax considerations, which is another benefit. The donor also can recommend that the fund make distributions to qualified charitable organizations.

Some people are comfortable with their current gifting strategies. Others, however, may want a more advanced strategy that can maximize their gift and generate potential tax benefits. A financial professional can help you assess which approach may work best for you.  If you have questions about charitable giving call CapSouth at 800.929.1001 or visit our website at www.capsouthwm.com

Remember, the information in this article is not a replacement for real-life advice. It may not be used for the purpose of avoiding any federal tax penalties. Make sure to consult your tax, legal, or accounting professional before modifying your charitable giving strategy.

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[1] https://givingusa.org/giving-usa-2018-americans-gave-410-02-billion-to-charity-in-2017-crossing-the-400-billion-mark-for-the-first-time/

Administrative Assistant Position Opening

Administrative Assistant opening with a fast-paced wealth management company

 

CapSouth Wealth Management is a growing Wealth Management company in Dothan, Alabama, with offices in 2 other states, and actively looking to expand.  We are currently looking for an individual who gets excited about taking on challenges and can multitask in a high-demand and fast-paced environment.  The right individual will also embody our core values and thrive on working with a team.  We offer competitive pay, great benefits, and opportunity for growth.

 

Administrative Assistants are responsible for the overall management of the office environment.  This position requires high detail-oriented and organizational skills.  In a local office, this position will be relied upon to keep the office functioning at a high level of efficiency and be available to assist all personnel in the office on an as needed basis.  Administrative Assistants should have at least 2 years’ experience in administrative and/or office management positions, or a related degree from a four-year university.

 

Responsibilities include but are not limited to:

  • Welcome clients and guests as they come into the office with personalized greetings
  • Participate in client meetings by taking and posting follow up notes and tasks
  • Answer incoming calls, both internally and externally, in a warm, pleasant, and professional manner
  • Responsible for all local office paperwork preparation and processing with minimal mistakes
  • Manage and oversee the cleaning, landscape, grounds, and other maintenance contracts and work
  • Track, purchase, stock and maintain office supplies and storage

 

Requirements

  • Minimum of two years of college or post high school education (financial background a plus)
  • Must be efficient in Microsoft Word and Excel
  • Excellent verbal and written communication skills
  • Excellent client service and interpersonal skills
  • Ability to manage and protect highly sensitive information in a discreet fashion
  • Detail oriented and very organized
  • Bookkeeping experience

 

Benefits include:

  • Off every Friday at 1 pm
  • 401k plan with match, non-elective contribution, and potential for profit-sharing contributions
  • 10.5 annual holidays
  • Paid time off starting at 8 days the first year, increasing to 13 days in year two
  • Great medical benefits (partially subsidized by the company), along with the option to add a supplemental medical coverage, dental, vision, long-term disability, life, and voluntary life.

 

Email resumes to: karmstrong@capsouthpartners.com

 

Fax resumes to:  334.673.8625

 

Drop off resumes to Amy Kennedy:

CapSouth Wealth Management

2216 West Main Street

Dothan, AL  36301

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