WARNING: Tax Information That is Worse Than Worthless

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Free financial advice is often the most expensive advice you’ll ever get. And when it comes to tax information, old information can be really bad news.

Today, I got a call from a friend who told me one of my blog posts had been lifted by another site. Okay, not too bad, although that’s not according to the Internet ethical standards. You’re supposed to either do a ping back, get permission or at the very least, cite where you got the blog.

Then she told me that it looked pretty old. And as she read it to me over the phone, I found that the links had been changed to promote the other site. Now, that’s cold. You’re using my copy to sell your stuff in direct competition with me?

I was just walking into a meeting/hang out time with another friend who has told me I can’t use his name in my blog. So “he who shall remain nameless” (because he’s very famous in some copywriting circles) laughed when I was indignant. He said “why do you think we call it COPYwriting”. He said, “Spin it. Out the guy for using your information. And then say your info must be pretty good for it to get ripped off.”

I looked it up and found it was written TWO years ago. Then I changed my tune. Now I’m indignant for you, the reader. You might stumble on this post, see my name and figure it’s good information. But the fact is it’s really old. So, I apologize in advance for what will be a long post. I’m going to post what I said two years ago (and shown as current info) and then tell you what is true for now!

Avoid Tax Information That is Worse Than Worthless!

Here’s what was posted – you’ll see my comments below portions that are incorrect:

Looks like the days of the kinder, gentler IRS are definitely gone. Mark Everson has been the commissioner for almost 4 years now.

Good sign to how old this is. Mr. Everson left the IRS in May 2007.

One of the things he promised when he took the job was that he was going to get tough. And, boy, he has. I did a search on “tougher IRS audits” and was astounded by all the press releases that listed all the places that the IRS demonstrated that they were getting tough: car dealers, manufacturers, real estate professionals, anyone with international transactions, anyone reporting on a cash basis – the list goes on and on.

Well, that was true then. Today, the IRS hit list includes:

Sole proprietors, who often underreport income and inflate write-offs.

S corporations and partnerships, especially S company owners who take dividends instead of salaries to minimize payroll tax liability.

Gamblers who may underreport their winnings or who subtract losses from winnings instead of reporting them as miscellaneous itemized deductions, as the law requires.

Part-time farmers, who aren’t supposed to use losses from farming to reduce their other income if they’re just pursuing a hobby and not running a business.

Taxpayers who itemize deductions on Schedule A. Errors occur most often with medical costs, charitable contributions and job-related expenses.

Earned income tax credits taken by individuals who don’t qualify.

Investors who don’t report capital gains properly. These include gains on sales of vacation homes, rental units, business property and farmland.

It’s likely that the call for more IRS audit staff (so they can audit even more people) is going to be successful as well. That’s because the IRS has proven that their aggressive tactics at collecting money is working. Now, here’s the big question for you:Are you ready for that IRS audit that may be coming your way?

Over the past few days, I’ve been checking in with my CPA colleagues and asked them what they’ve seen happen with IRS audits for their clients. We all agree on one thing – the number of audits is on the rise. Here’s the fact you’re going to have to face: If you have a business or invest (real estate or paper assets), the chances are you’re going to get audited. Some of the things they’re looking for are exactly the same that they’ve done in the past such as good record-keeping and proof that there is a business purpose on deductions that you’ve taken. But there are two new items that they are hitting hard.

I do talk to a lot of top people in tax across the country (governmental agents as well as CPAs). They are seeing tougher audits and more of them.

IRS Tactic #1: Attack the Real Estate Professional Status.

Boy, this was prophetic. I erased the rest of the information that was in my old post because it was, well, old.

The IRS went after Real Estate Professional status with a vengeance. I’m going to be starting a series of emails about the latest on Real Estate Professional status and particularly real estate investors who have losses. What’s the best way to report this? DO NOT FILE if you have real estate until you read these important emails. Look for that to start near the end of this week.

Meanwhile, if you’d like to find out how we safely and legally save our clients money, please give Richard a call at 888.592.4769 or drop him an email at Richard@DKTaxServices.com.

IRS Tactic #2: Prove That No Business Structure Legally Exists. The second issue is even more dangerous, though.

I’m not sure I agree that this is the most dangerous issue for a tax filer in today’s world. It’s still important, though, so I left the text in.

That’s because the IRS is going to find tens of thousands of people who are not in compliance. And if they find that many, that means they’re going to beef up the audit force even more.

And, what does that mean for you? If you have a business or investments that you hold within a business structures such as an LLC, LP, S Corporation or C Corporation, LOOK OUT!

There is probably an audit with your name on it. In just a second, I’ll tell you the one question they’re going to ask you that you BETTER be prepared for. Because if you’re not ready with the right answer, you could get hit with thousands of dollars of back taxes and penalties.

Before I do that though, I want to let you know that there is a way to solve this problem, even if the IRS sent a notice tomorrow. But, you’ve got act now to fix the problem. Here’s the question, you will absolutely be asked, “May I see your minutes and corporation/LLC documents?

If you say, “I don’t have them.” or “They’re not up to date,” the chances are good that you’re about to lose a bunch of deductions. That’s because without those records, you can’t say you have a legitimate business structure in place.

You MUST operate your business like a business and follow the correct business formalities. If you don’t, the business structure doesn’t do you a bit of good. If you are like thousands and thousands other business owners, you might find that you haven’t been able to keep up with your minutes, haven’t properly issued stock certificates and membership amounts or even filed what you should, when you should. You might have made loans to the business or taken money out as loans without doing proper notes. (This one little mistake can cost you BIG TIME in a corporate structure.) So, if that’s where you are now, what is the solution?

There are really two ways to solve this.

1 – Call your attorney. And, assume that he/she is available to get your documents up to date and an even bigger assumption – that the cost of doing so doesn’t bankrupt you.

Or 2 – Immediately go to The Operations Guide for Corporations and The Operations Guide for LLCs and LPs.

Download them and read the instructions, step by step, to make sure you’ve properly issued stock and recorded it, created annual filings for your state, prepared notes for money you’ve put in and taken out of your business and most importantly, created the mandatory annual minutes.

What you pay here is a fraction of the price you’d pay an attorney for this information. And, you’ll have not only the forms you need, but an explanation of why you need them, and how they should be completed. I’ve been working in public accounting for over 25 years now. I’ve seen a tough IRS and I’ve seen the kinder, gentler one too. I’m afraid we’re going back to the tough days. I’ve been through it before, and I know how brutal it can be if you’re not ready. Do yourself, your business and your family a favor – get ready now! Warmly, Diane Kennedy

P.P.S. If you have the slightest concern that your business structure isn’t up to date, don’t wait for that dreaded notice from the IRS. Get your records caught up today!

I left the ending just like it’s at the other website. The links in here ended up either as dead-end links or they went directly to the guys who posted the content. But, they left my signature in.

There is a morale to this story. The Internet has a very long memory. If you use it to research information, make sure what you’re getting is timely. For that matter, if you go back through the hundreds and hundreds of blog entries and thousands of forum posts at this site, you’ll find a lot of incredibly useful information. When it comes to taxes, though, the law changes rapidly. So please don’t assume that what you read is current. Take the time, no matter who the author is (or was), to verify that it’s still accurate.

And I have a favor to ask, if you see a post with my name on it at someone else’s site and they haven’t attributed back to one of my sites, can you drop me a note? I want to make sure they aren’t using my name to promote something illegal and downright harmful to the reader.

Bad Tax Information is Worse Than Worthless, It’s Harmful and Sometimes Even Criminal.

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