What the IRS Doesn't Want You to Know: A CPA Reveals the Tricks of the Trade

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 * How can outdated IRS technology benefit you?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.

Table of Contents:
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