What the IRS Doesn't Want You to Know. A CPA Reveals the Tricks of the Trade. 9th Edition

  • ID: 2210348
  • Book
  • 432 Pages
  • John Wiley and Sons Ltd
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With tax laws constantly changing and existing regulations hidden in volumes of tax code, nothing related to taxes is easy to figure out. Businesses and individuals in every income bracket need expert advice that cuts through the IRS bureaucracy and shows them how to work within the system. In What the IRS Doesn’t Want You to Know: A CPA Reveals the Tricks of the Trade, tax expert Martin S. Kaplan reveals critical strategies that the best CPAs use for their clients to file shrewd, legal, money–saving returns.

Filled with in–depth insights and practical advice, this book will help you answer such questions as:

- How can you approach the "new" IRS to maximize your tax return success?
- What are the latest IRS weapons?
- What are the biggest taxpayer misconceptions?
- What are the most commonly overlooked credits and deductions?
- How will new tax legislation affect you?
- How can outdated IRS technology benefit you?
- What forms should you never fill out?

From deciphering the Jobs and Growth Tax Relief Reconciliation Act of 2003 to understanding the personality of the IRS, What the IRS Doesn’t Want You to Know will help you shape your tax strategies and stay on top of your current financial situation.
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Acknowledgments ix

1 Why Every Taxpayer Must Read This Book 1

CPAs Grade Clients 7

2 The IRS Personality: Playing It to Your Advantage 13

Events That Shaped the IRS Personality 13

Never Forget! 36

Acknowledging Dedicated IRS Personnel 37

3 Who Runs the Show: What You re Up Against 39

The Image 39

What It Looks Like from the Inside Out 40

The Organization 41

What You Need to Know about the Examination Division 42

What You Need to Know about the Collection Division 54

What You Need to Know about the Criminal Investigation Division 60

What You Need to Know about the Taxpayer Services Division 68

4 IRS People: Whom You Need to Know; What They re Really Like; How to Work with Them; Standard Operating Procedures 71

The IRS Chain of Command 71

Who Runs the Show? 72

The Examination Division 72

The Collection Division 79

The Criminal Investigation Division 84

The Upper Echelons 85

Offering a Bribe What Are the Consequences? 88

Standard Operating Procedures 89

5 Neutralizing the IRS s Power 95

The IRS Power Base 95

Power from Information Resources 95

Power from the IRS s Unique Legal Standing 99

Power from Its Unique Role as a Law Enforcement Agency 99

Power from Its Unique Legislation–Creating Authority 101

Power to Make Mistakes without Consequences 106

Power from the Freedom to Do What It Wants 106

Why Does This Continue? 109

6 IRS Technology: What Works, What Doesn t Work 113

The Processing Pipeline 114

The Nonprocessing Pipeline 115

The Rest of the Process 118

Where the IRS Technology Works 119

Where Mistakes Are Made in the IRS Matching Program 123

Where the IRS Technology Falls Short on the Income Side 125

Where the IRS Technology Falls Short Mortgage Interest and Real Estate Tax 131

Where the IRS Technology Falls Short Nonfilers and Underreporters 134

Where the IRS Technology Falls Short Lack of Reporting Requirements for Corporations 134

Where the IRS Technology Falls Short The Audit Level 136

Technology Overhaul a Fiasco Still 136

7 IRS Targets and What to Do If You re One of Them 139

Are You in the Line of Fire? 139

Target: The Self–Employed 140

Target: Cash–Intensive Businesses 161

Target: Industries in the Market Segment Specialization Program 163

Target: Nonfilers 168

Target: Tax Cheaters Omission of Income 171

Target: Tax Delinquents and Tax Scam Artists 173

8 How to Completely Avoid an Audit 175

Don t Fear Audit Statistics 175

Audits at an All–Time Low 176

Live Audits Are Aimed at Corporations 177

Audits of Estate and Gift Tax Returns 178

How to Prevent Audit Problems Before They Occur 179

How Long Should Taxpayers Keep Records? 181

How to Completely Avoid an Audit 182

Small Business Corporations (S Corporations) 183

Limited Liability Companies and Partnerships 191

Partnerships 192

Business Ventures and the Hobby Loss Rule 194

Businesses That Include Merchandise Inventory 197

Securing a Tax–Advantaged Life 199

9 The Twenty Greatest Taxpayer Misconceptions 211

10 How to Hold On to More Money: Overlooked Credits and Deductions 223

Selling Securities from a Dividend Reinvestment Plan 223

Identifying Specific Securities That Are Sold 223

Unamortized Points on a Home Mortgage 224

Deductible Interest on a Home Equity Loan 224

Unused Losses, Expenses, and Credits 224

Self–Employed Deduction for Health Insurance 225

Charitable Donations Securities 225

Charitable Donations Household Items 225

Social Security Tax Overpayments 226

Job–Hunting Expenses 226

State Income Tax Deductions 226

Parental or Grandparental Support 227

Federal Income Tax Withheld on Form 1099 227

Classroom Expenses for Teachers 227

11 Ten Ground Rules Never to Break to Win with the IRS 229

Rule 1. Always Report Income on Your Tax Return That Is Being Reported to the IRS by Third–Party Payers 229

Rule 2. Never Include Other Forms That Are Not Required with Your Tax Return Do Not Volunteer Additional Information 232

Rule 3. If Any Information That You Are Putting on a Tax Return Is a Gray Area, Go for as Close to Full
Deductibility as Possible 237

Rule 4. File Your Personal Tax Return by April 15 Use an Extension Only If Absolutely Necessary 246

Rule 5. Don t Worry about Being Unable to Interpret or Decipher the Complex IRS Tax Forms Many IRS
Auditors Don t Understand Them Either 247

Rule 6. Strive to Be Neat 250

Rule 7. When All Else Fails, Follow One or More of These Four Steps 250

Rule 8. Make It Your Business to Know Which Tax Loopholes Apply to Your Personal Tax Situation 252

Rule 9. Use to Your Advantage the Fact That the IRS System for Document Retrieval Is Archaic 264

Rule 10. If You Are Involved with IRS Personnel in Any Way, Behave Decently 266

12 The Latest Tax Legislation: What to Watch Out For, How to Benefit 269

The Jobs and Growth Tax Relief Reconciliation Act of 2003 270

2001 Tax Legislation 276

The Tax Acts of 2001 and 2003: Conclusions 300

Taxpayer Protections and Rights 301

13 The New IRS: What Are Its Goals? 313

New IRS Mission 313

Serving Four Groups of Taxpayers 313

Obstacles to Overcome 314

IRS on Track Direction: Electronic Filing of Individual Returns 319

Direction: E–Filing on Personal Computers 321

Direction: Telephone Filing (TeleFiling) 322

Direction: Electronic Filing for Businesses Electronic Federal Tax Payment System 323

Direction: Increasing Compliance 325

How to Pay What You Owe You Choose 325

Direction: Paying Taxes with Plastic 331

Appendix A: Most Important Tax Forms Discussed in This Book 333

Appendix B: State Filing Authority Telephone Numbers and Web Sites 369

Appendix C: Your Rights as a Taxpayer 371

Appendix D: Useful Web Sites 383

Appendix E: Internal Revenue Service (Future Organization) 389

Notes 391

Bibliography 399

Index 407
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MARTIN S. KAPLAN has been a certified public accountant for more than thirty years. His extensive experience includes audit and accounting work, tax planning, and representing clients in IRS matters.

You can ask Mr. Kaplan tax questions at www.irsmaven.com.
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