Monday, April 04, 2011

Red Flag Watch: Tips to Avoid Tax Audits

If you have not yet filed your tax return, then check out these tips to help prevent receiving an IRS audit. Then, go prepare your return, or request an extension! Time is running out.

From Victoria

Many taxpayers fall victim to tax preparer fraud. According to the IRS, the individual is often left holding the bag after a fraudulent preparer has skipped town with money from inflated returns after lying to the IRS and expensive fees. To avoid these dishonest people, take your business to well-known chain preparers or verify the person's PTIN, or Preparer Tax Identification Number.

Offshore accounts can sometimes spell trouble and alert IRS reviewers. According to MSN Money, the IRS's No. 1 audit priority has been investigating offshore account holdings, especially in tax haven countries that allow income to be hidden. If you have offshore debit or credit cards, wire transfers, foreign trusts, private annuity or insurance plans, the IRS urges you strongly to report them.

Don't abuse trusts. The IRS and MSN Money both advised of too-good-to-be-true trust schemes, promising you that your family or business trust will boost your income, provide personal deductions and reduce estate or gift taxes. A trusted professional should be consulted before agreeing such a trust arrangement.

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