The IRS is an agency of mystery – and power. The IRS has the power to garnish your wages, throw you in jail or generally make your life difficult, if you run afoul of tax law. So how do they operate and what are they not telling us? Here’s a list of the things the IRS generally would prefer you didn’t know about this tax filing season:
- It’s all a matter of interpretation. You’d think tax law is hard and fast, but the truth is that things can get pretty grey when it gets down to the details. For example, there’s the case of the couple that the IRS allowed to deduct the cost of feeding wild cats on their property because the cats fended off snakes, rats and other vermin. Or, the man who was able to deduct money he gave his girlfriend to care for rental properties he owned. And, the stripper who was allowed to deduct her breast enhancements as a cost of doing business. Don’t assume your deduction will be rejected, but check with a tax professional before claiming it.
- April 15 is not necessarily the deadline. You can get a no-questions-asked six month extension for filing your final tax form, if you pay any taxes you owe by April 15. Download Form 4868 from www.irs.gov to request an extension and include a check for whatever you estimate you owe – that’s the critical part! Even if you can’t afford the entire bill, the IRS allows you to structure a payment plan.
- Getting audited isn’t the big deal you might think. Getting the letter in the mail from the IRS may cause anxiety, but, these days the agency is conducting correspondence audits, audits automated by computer reviews of your filings. These audits are done through the mail, and are seeking additional information. This is the lowest level of audit and if you can provide sufficient evidence to resolve the question, the audit is dropped. Oh, by the way, the audit rate is just about 1 percent.
- If you’re planning to use the “I had a crook as an accountant,” as a defense, forget it. If you’re tax preparer is incompetent or simply a crook, you’ll still be on the hook for any fines or fees levied as a result of his or her mistakes. Read the final product – the most common way preparers boost refunds is by inventing fake children.
- Don’t expect a returned phone call, if you have a question. The IRS has said it is only responding to “basic” questions this year, whatever that means. So if you’re trying to understand a nuance of tax law, you’re better off asking a tax pro.
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Gerri Willis is the host of "The Willis Report" (6 & 9PM/ET), a primetime program that covers the leading financial and political stories of the day and their impact on consumers. Click here to see more from Gerri Willis.