Jack from Ohio

Agree with KC. Only the amount above the threshold is eligible for abatement of the penalty. Taking money from any retirement plan is the most expensive source of funds. I am constantly advising my clients to make that a choice of last resort and NEVER for paying off other debt or to buy "stuff."

Very well explained!!!

Not relevant. Lion is correct. Just make the entries for part year as she indicated.

It is why she is hiding behind the 5th amendment....

Send these comments to the suggestion box on the MYATX website. Otherwise, the comments will be of no avail.

1. Doubtful 2. ABSOLUTELY NOT!!!

Contact me the next time you are going to Columbus or Oxford. Both are not too far from me. We can meet and trade war stories and such.

ONLY if the client owes tax. Otherwise, no consequences.

We have three clients that we mail the returns to them with her married name on them, then change her name to her maiden name and efile. We stopped asking....

What's not to love, and who could be afraid of such an intelligent lady?? (is there something about Rita I missed? Black belt, etc.?) Plus, my family heritage is from TN, so she feels like family!!

Might be an excuse for us to travel to CA. Where in CA are you located?

Did you make sure that what you filed matched EXACTLY what is on her SS card? EXACTLY. "Client is sure..." is not good enough unless she is reading from the SS card. Been through this dozens of times and what the client is "sure of" very rarely matches the SS card.

If your business is profitable, the OIH will save a between 25%-40% tax on every OIH dollar deduction. When selling the home, the very small amount of depreciation recapture will be treated as capital gains currently taxed at a maximum of 15%. A good trade, no matter how you look at it. All the fears about OIH are unfounded if done accurately and properly. At the firm, in 30 years of doing tax returns for small businesses, which is our main emphasis, only one audit questioned the OIH and it was an afterthought, not the original cause of the audit. For the record, we prepared 2,200+ returns at the firm for small businesses. 70% of those have OIH. The numbers have been that high for over 20 years.

If then amount is substantial, amend. Amending does NOT increase your chance of audit. Fly straight, fly right, do it correctly and amend.

DIF scores are a comparison of your return to the established "averages or normal" for the same kind of return and entries. When your numbers differ from the "average" it changes your DIF score. During the processing routine all tax returns are scored or rated for audit potential under IRS's top secret computer program called DIF, for Discriminant Function. The higher the DIF score, the greater the potential of bringing in additional taxes under the audit. The IRS strives to audit the higher-scored returns first BECAUSE of the expectation of getting more revenue for government coffers. DIF scores are developed from an analysis of a series (involving up to 50,000 randomly selected returns) of intensive audits, conducted every few years, called the Taxpayer Compliance Measurement Program (TCMP). In a TCMP audit, the IRS will analyze every item on the tax return, including proof of income. (DIF scores therefore reflect correlated averages found on a cross-section of tax returns.)

It is a deduction you are entitled to take, and will have a reasonable impact on your return. As long as you continue to report all your income, why not report all the legitimate deductions you are entitled to? The idea that it increases your chances of audit is an urban myth spread by a bunch of old wives. Do it correctly, and don't look back.

Official word from the IRS is that in 2012, .9% of all returns were audited.

Your Paranoia is unfounded.

Janitor Bob, Pikester and I are already planning an Ohio meeting in Sidney. Is anyone else going to the IRS Forum in Chicago? I have my reservations already made and will meet up with MAS again. Could be a good place to meet.

Audit-Misconception #2 "Each year I file my tax return around April 15th because it reduces my chances of being audited." This misconception, started a few years ago by another tax author, was based on an erroneous assumption about the IRS's computer system. During the processing routine all tax returns are scored or rated for audit potential under IRS's top secret computer program called DIF, for Discriminant Function. The higher the DIF score, the greater the potential of bringing in additional taxes under the audit. The IRS strives to audit the higher-scored returns first BECAUSE of the expectation of getting more revenue for government coffers. DIF scores are developed from an analysis of a series (involving up to 50,000 randomly selected returns) of intensive audits, conducted every few years, called the Taxpayer Compliance Measurement Program (TCMP). In a TCMP audit, the IRS will analyze every item on the tax return, including proof of income. (DIF scores therefore reflect correlated averages found on a cross-section of tax returns.) The assumption behind this misconception is that a cut-off score of 240 may be the high cut-off score in February when fewer returns are filed, but 260 may be the cut-off score in April when more returns are filed. Therefore, if your DIF score is somewhere between 240 and 260, then your chances of being audited are lessened by filing in April when everyone else files. This misconception is based on a poor understanding of how returns are selected for audit. The selection process does not even begin until after the end of June, over two months past the end of the April 15 deadline. The first step occurs when computer-selected returns are arranged in batches of examination class, a method used to categorize returns by the amount of income reported. All returns are placed into one of 12 classes based on their total positive income (TPI) for individuals or total gross receipts (TGR) for businesses. (See Exhibit 5-3 in Chapter 5 for a breakdown of each TPI and TGR category, the number and percentage of returns audited and the average tax and penalty recommended per return in each category.) Throughout the year, district IRS offices place orders with the IRS service centers for returns to audit. The service center then pulls those returns that are above a specific DIF cutoff score and sends them to the district office. Districts are required to order returns numerous times over a twelve-month period so that all tax returns, regardless of their filing date, have an equal chance of being delivered to the district for classification,a manual selection procedure performed by revenue agents called classifiers. Another aspect of the selection system is the actual classification process. The IRS requires that the highest DIF scores within each examination class be pulled and manually screened for audit potential by the classifier. A high DIF score is "any return with a score above the median score delivered for each examination class." If it appears to the classifier that the tax return is in order or that you have included sufficient substantiating or appropriate documentation with the return, the return will most likely be sent back to the service center without being audited. The classifier relies of his or her experience, judgment, and instincts to analyze the returns to find the ones with the greatest likelihood of change. This interesting part of this whole process is that while the classifier receives a high Dif-Score return, the various items on the return that resulted in the high DIF score are not identified. Therefore, the classifier must decide what items on the tax return will be questioned during the audit. More than any other non-DIF factor, the classifier's decision is the most significant variable in the selection process. See Exhibit 0-1 for IRS guidelines to classifiers on how to identify significant issues when selecting returns for audit. Agents with classification experience have stated that subjective factors frequently enter into the selection process. For example, one classifier selected returns that were sloppily prepared, or ones that had a lot of rounded numbers in the expense columns (for example, $25,000 for travel expenses instead of $24,679). Another agent stated he selected returns that were prepared by certain commercial tax preparers. The fact is you cannot influence your DIF score, and you should not try by fooling around with the expense figures on your return. But you may be able to influence the classifier's decision and reduce your chances of being audited by following this simple rule that may turn out to be the single most important audit-proofing strategy rule in the entire book:

at .9% audit rate, there is no "more likely" that will be statistically relevant. DIF scores have been the reason for all the audits we have helped with at the firm for the past 3 years.

The rejection means that someone else filed an extension. No indication of ID theft here. Contact the clients and find out when they sent/submitted the extensions and record it in their file. Ask them to send you a copy as well.

Does she have a sister that lives near Dayton Ohio??

I will bet you a steak dinner that all upgraded PC's at the IRS will have WIN8.

Well at least they didn't hide behind the 5th amendment. No wonder the IRS is so slow.......