Economics Finance

IRS selects around 1.5 million taxpayers in a year and ‘invites’ those to explain inconsistencies in their tax return. How does it select these taxpayers out of 135 million returns filed every year? Well most of the times it applies some criteria to pick a ‘deserving’ taxpayer. Here are some important ones.

1. Mathematical corrections – Usually IRS computers generate these audits. If you have made mistakes while filing your tax return, these computers are most likely to catch you. These are silly mathematical mistakes which you would have avoided easily. Some of these mistakes are – entering incorrect spelling of your name on your tax return, entering incorrect social security number, entering the incorrect status, making a wrong calculations about earned income credit and improper assessment of estimated tax.

Usually IRS assumes that your details are correct and makes the calculation of your tax figures based on them. If there is any additional tax liability, they will add interest and penalties to it and you will be sent a notice demanding such money.

You will have a period of 30 days to contact IRS and schedule an appointment to prove that your original data is correct. Continue reading ‘How You Enter the Cage of Tax Audit’ »

You may be coming across many ‘clues’ about people enjoying a flashy lifestyle by hiding their income from IRS. As an honest taxpayer, you can pass on this information to the IRS and get some reward in the bargain.

If you suspect that someone is evading taxes, you can become an IRS informant to get his fraud exposed. You can start the process by making a single phone call. If you contact the Informant Communication Hot-line, they will be able to register your information for further investigation. If you want your effort to be rewarded, that time itself you should inform them that you wish to file Form 211. You have to be very clear on this. If you forget to mention about the reward or Form 211, you may not be able to claim any reward later.

In this form, you have to enter your name, fill in all other details and then sign it. If you want to claim a reward, you must disclose your real name. Your details are kept strictly confidential. You should mail this form to the IRS center, addressing it to Informants Claim Examiner.

You should not file this form just for taking revenge. You must have some substantial information which IRS is not able to access so far. Just informing the IRS about something which is available on public records will not be of any use. The information should lead to the recovery of substantial revenue. Continue reading ‘Want to Become an Informant For the IRS? Know the Rules’ »