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Watch Out for These Red Flags to Avoid an IRS Audit

March 20, 2019

Many clients from across Denver, Aurora, Littleton and surrounds come to us here at Advanced Tax Solutions during tax time in fear of being audited. Truth be told, the IRS does not now nor has never revealed it's auditing criteria. That said, many of the supposed reasons individuals and business have been audited in the past are shrouded in rumor, urban myth, and straight out fiction. 

The fact remains that if you have nothing to hide in your tax returns, than you should have nothing to fear. At Advanced Tax Solutions, we’ll tackle your 2019 tax returns with the benefit of several years of experience assisting Denver-area businesses in maximizing their returns, and filing their taxes in a concise, professional and organized manner. What are some of the things that audited tax returns have in common? Read on to find out. Many of these issues may seem obvious, but you’d be surprise about the lengths some people go to to manipulate the IRS —even with the best intentions in mind. 

Overtly High Deductions.

Inflating figures and taking rare deductions are a surefire way to have your return flagged at the IRS. It may seem like common sense, but do not unnecessarily inflate figures such as mortgage interest or charitable donations. Firstly, the IRS receives documentation regarding the interest paid on your mortgage from your mortgage broker. Secondly, overstating charitable donations is a mistake since the IRS does not receive information about donations from charities. As such, outlandish donations or donation amounts that are obviously not in line with your income can stand out. 

That said, the IRS utilizes confidential, automated statistical algorithms to analyze deductions in comparison to income. Any red flags that these algorithms spark may need to be backed by proof of the individual or business entity via an audit. 

Unreported Income

If you have a full-time job, but maybe do a handful of “consulting” projects on the time throughout the tax year, you might be tempted to omit this “side income” form your tax return. After all, you reason with yourself, it’s not your “actual” job. Nevertheless, this course of action is always a mistake. When your federal income tax stipulates that you must report all income —it means all income. 

The IRS receives copies of your W-2 and 1099 forms from each of the companies or clients you worked for, and this information is, in, turn, compared to the data you file in your tax return. If that data doesn’t line up, then the possibility of your return being red flagged for an audit drastically increases. 

Foreign Financial Accounts

Many individuals, whether on purpose or by accident, fail to report foreign financial accounts in their U.S. tax returns, whether they be bank accounts, brokerage accounts or mutual funds – you may need to report it to the IRS when you file your taxes. Failure to disclose foreign accounts isn’t just a red flag for an IRS audit, it could also result in fines of up to $10,000. 

Erroneous or Aggrandized Business Expenditures

The pitfalls of making false claims about your business expenditures on your tax returns are numerous and varied. Businesses that claim more deductions than profits, post rounded numbers for expense values, write off personal expenses such as vehicles or cellphones as businesses expenses, or report a profit loss for their business for too many consecutive years are all flashpoints for both the IRS and their return evaluation apparatus. In addition, as the “gig economy” grows in scope, the IRS is continually monitoring cash-only businesses, such as restaurants and car share driving firms. 

Claiming Non-Existent Dependents

Whether by simple mistake, or as one of the more dubious strategies to garner deductions, many split households make the choice to claim children as full-time dependents, even though they no longer file taxes with their child's parent. Given the fact that child custody cases are difficult in their own right, such mistakes are often submitted without nefarious intent, but nonetheless, they are still a routine cause for an IRS review of your tax return. While an official IRS review is not an audit, it could, in, fact lead to an audit if further discrepancies are uncovered. 

How Advanced Tax Solutions Can Help

At Advanced Tax Solutions, we’re proud to be one of the Denver, Aurora, Littleton region’s most  trusted tax preparers and tax advisors. Our team will carefully and confidentially evaluate your business tax situation and guide you through any potential challenges that arise during the filing both your business and professional tax returns. Whether you have many millions of dollars and assets or simply run a Denver-area small business, our goal is always the same: to minimize your tax liability so that you can keep more of your hard-earned money.

Throughout the calendar year, the knowledgeable and experienced team of tax experts here at Advanced Tax Solutions make it their job to stay up-to-date on current federal and state tax laws through continuing education. That way, we can take advantage of the latest tax codes when we prepare your business tax returns, so you won’t miss out on any tax credits and deductions that you and your family are entitled to. 

Contact the the Advanced Tax Solutions team to day to learn how you can avoid an IRS tax review or audit for the 2019 tax season by taking advantage of our many tax filing and tax preparation services for both individuals and businesses.

Why Hire Professionals for Unfiled Tax Return Help?

By Todd Whalen - March 18, 2019

If you owe the Internal Revenue Service for unpaid taxes, you could be making the situation worse by failing to file. Do you need unfiled tax return help? If it’s been a while since you filed a tax return, or perhaps you’ve never filed, you need the help of unfiled tax return services from a professional for the best outcome. Unfiled tax return professionals deal with people every day who have either never filed a tax return or haven’t filed for a year or more, and they have the training, experience, and skills to handle your situation. You may be due a refund, but you only have three years to file a return and claim it. However, the Internal Revenue Service has 10 years to request an unfiled tax return. The IRS will assess a 5% penalty to your unpaid tax liability each month it is not paid after the filing deadline. If penalties are being assessed against you for not filing your tax return, the amount you owe could be growing larger every day. Don’t let that thought overwhelm you. Advanced Tax Solutions in Denver can help you resolve any issues with our tax filing services so you can breathe easier.

Many consumers who owe the IRS back taxes are unaware of the fact that the penalty for failure to file a tax return is often higher than the penalty for failure to pay those back taxes. Even if you owe a tax debt, you should always file and the IRS will work out a deal to determine how much of your tax bill you can afford to pay. You may even qualify for IRS debt forgiveness program. Many thousands of citizens have a tax bill they cannot pay, so the IRS has developed something called Reasonable Collection Potential, or RCP for those who can prove they truly can’t afford to pay their tax debt in full. This entails allowing you to pay for necessary living expenses first, and whatever is left goes to pay off your debt. It is always in your best interest to file your tax returns, but it is in the best interest of the IRS to negotiate with you so that they get at least a portion of what you owe.

Don’t try to negotiate your tax debt repayment plan by yourself! Advanced Tax Solutions understands the intricacies involved in negotiating deals with the Internal Revenue Service, and we’re here to help you get out from under the burden of an ever-increasing tax debt. We are skilled at getting the IRS to accept the lowest possible RCP for our clients, and our unfiled tax return services can offer you the peace of mind that comes with knowing your tax debt situation is being handled professionally and in your best interest. We will be able to determine if a payment plan, Offer in Compromise, penalty abatement, or another method will work best for your unique situation.

If you’re trying to get out from under a tax debt burden, get in touch with us today for unfiled tax return help, and get our experienced team of unfiled tax return professionals working for you right now! Dealing with IRS problems can be very difficult, and at Advanced Tax Solutions we realize that no two problems are identical. Call our office for unfiled tax services in Denver any time at (303) 753-6040 and let us help you find the solution to your unfiled tax return problems. Our goal is to help you put your tax problems far behind you as quickly as possible. Contact us today, and let’s get started.

Top Nine Reasons to Utilize a Tax Preparer This Tax Season

March 6, 2019

Boxes of receipts, a confusing pile of forms from work, letters from charities you’re affiliated with —when tax time comes along, confusion can rule the day. That’s why the professionals here at Advanced Tax Solutions encourage families from Denver, small business owners from Aurora, and self-employed individuals from Littleton to trust us to prepare their tax return right the first time. Having a team of experienced, professional, and knowledgeable tax professionals in your corner can go a long way toward maximizing your 2019 tax return while staving off errors that commonly occur when you go it alone. 

9. Avoid Confusion - Let’s face it, not all of us are numerically inclined. But that’s okay. If paperwork, and perhaps more importantly, financial-related mathematics aren’t your strong suit, having a tax preparer who is well versed and savvy with the latest IRS forms and documentation requirements is the perfect ally to quell your fear of numbers. Our team of tax professionals to take you through the process in a calm and organized fashion and happily answer all the questions you have along the way. 

8. Free Up Your Schedule & Avoid Procrastination - Sometimes when it’s up to us as individuals to get our taxes done, they simply don’t get done. Whether it’s fear of making a mistake, failure to carve out time for your hectic schedule, or simply a lack of desire to unpack your financial year, procrastinating on your taxes can cost you thousands of dollars down the road. When Denver-area taxpayers prepare their returns with Advanced Tax Solutions, they do so in accordance with their obligations to work and family while getting their returns filed well before IRS deadlines. 

7. Keep Up with IRS Changes - Unbeknownst to many taxpayers, IRS rules and tax-related laws change year after year. And while it’s nearly impossible for non-tax professionals to keep abreast of all the changes, at Advanced Tax Solutions, it’s part of what we do everyday. With a tax professional who is up to date on changes to personal income tax law in 2019 in your corner, you can stay ahead of the curve and possibly even take advantage of new routes for tax savings. 

6. Avoid Potentially Costly Errors - While pricey computer software and online vendors have greatly reduced the chance of making errors when self-filing your tax return, they haven’t eliminated the risk entirely. Errors in your tax return don’t just have the potential to delay your return —they can actually end up costing you money. Advanced Tax Solutions prides itself on accuracy and transparency when we work with you to file your income tax return, all in effort to all-but-reduce errors that will delay your return and potentially cost you time and money down the road. 

5. Maintain Representation - Advanced Tax Solutions won’t just be with you throughout your filing process, we’ll stay with you long after. If in the event you’re audited at a later date, Advance Tax Solutions will stand by both our work and you as our client, helping you to navigate your audit as quickly and conveniently as possible. The team here at Advanced Tax Solutions in greater-Denver has successfully represented hundreds of local individuals and business through the IRS audit process, meaning you’ll have experience and professionalism in your corner. 

4. Make Smarter Tax Decisions - When you work with Denver’s Advanced Tax Solutions to file your 2019 personal income tax, you don’t just get organized, professional service. Our team can also steer you towards myriad tax breaks and specialized programs you may have been previously unfamiliar with. The IRS offers a variety of tax breaks and exemptions for self-employed professionals, families, and those who donate to charity. With Advanced Tax Solutions by your side, you’ll be able to spot opportunities to save you may have never knew existed. 

3. Plan for Future Tax Years - Making smarter tax decisions doesn’t have to be about just this year —but future years as well. At Advanced Tax Solutions, the conclusion of your 2019 income tax filing doesn’t have to mean an end to our partnership with you. Our team will give you sound advice to approach future tax years as well as pertinent information related to federal and state programs and exemptions to be on the lookout for for future tax years. 

2. Gain Peace of Mind - No more stress! When you have your federal income tax filing handled by Advanced Tax Solutions, you can cast away all the anxiety you have related to procrastinating on your taxes or fretting about potential errors. We have years of experience helping families, individuals, and small businesses from across Denver stay proactive about their federal income tax filing and make sure their taxes are filed correctly and on time each year they work with us. 

1. Save Money - Paying a reasonable fee for a tax professional to review and submit your taxes is far more affordable than what might happen when you submit a tax return late or rife with errors —especially when you’re not sure of the potential cost-saving measures you can take by utilizing special tax programs and exemptions. 

There’s a reason why Advanced Tax Solutions has been the among the greater-Denver region’s most trusted names in tax preparation year after year, and it’s time for you to find out why. Contact our team today to set up a free consultation and to learn more about how we can take the stress out of tax season while maximizing every possible angle to ensure your 2019 federal income tax return is as robust as possible. At Advanced Tax Solutions, we offer advanced solutions to complex tax problems.

Important Tax Filing Tips for Self-Employed Professionals in Denver

February 13, 2019

Whether you’re a consultant, private ski instructor, restoration carpenter or a freelance writer, there are a variety of professionals across Denver, Littleton and Aurora who make their living as self-employed professionals.  Self-employment has a variety of wonderful benefits, from choosing where and when you work, to selecting projects that cater to your interests and desire to learn. Some salaried or per-hour professionals also seek to earn an extra income outside of their “regular” jobs. Whether you’re a waitress, musician, tour guide, or part-time childcare provider, all income that you make outside of your “regular” job is considered self-employment income under Colorado state and US federal tax laws. 

When April 15th rolls around, many self-employed professionals —whether they are self -employed full-time or part-time — run into confusion about filing their income taxes. WHen you’re in a salaried position, your state and federal taxes are subtracted from your paycheck automatically —often with a matching contribution from your employer. When you are self-employed, you don’t have this privilege and must do all the legwork yourself. But don’t be discouraged. By following a few simple steps —and with Advanced Tax Solutions in your corner, filing self-employment taxes in Denver can be a breeze. Denver-area professionals who work as independent contractors, or who operate sole proprietorships  are deemed to be "self employed" in the eyes of Colorado tax laws. 

When you work with the competent tax pros at Advanced Tax Solutions, you can get through tax season with the confidence of knowing your taxes will be handled in a fast, organized manner that spares you from unnecessary payments while maximizing both your state and federal returns. Advanced Tax Solutions has years of experience helping both independent contractors and self-employed professionals navigate the tricky maze of income tax. Before you get started, here are some tax times every self-employed professional in Denver should keep in mind.

Do I Qualify as Self-Employed for Tax Purposes? 

Some individuals earn self-employed income in Colorado outside of their regular, salaried position. If so, you are considered self-employed by both state and federal criteria —if your self-employed, freelance, or independent contractor earnings exceed the allotted earnings limit. You are also considered self-employed if you: are a member of a partnership that carries on a trade or business or if you head a part-time business for yourself. Any "moonlighting" outside of your salaried job where income is self-generated is considered self-employment. 

How Much of My Denver Self-Employment Income is Taxable Income?

As of January, 2019, the IRS collects taxes on net earnings from self-employment of $400 or more. Simply put, if you earn a few hundred dollars working a special event, or presenting privately to another organization about your professional role and your self-employment or independent contractor earnings do not exceed $400, you don’t not have to pay taxes on those earnings.

For professionals whose entire income is generated through self-employment, however, the total amount of earnings subject to self-employment tax is generally 92.35% of your all your annual income from self-employment. Net earnings can be calculated by subtracting ordinary and necessary trade or business expenses from the gross income you derived from your trade or business. Colorado income tax is a flat 4.63% of your adjusted federal taxable income. If you are self-employed yet expect to owe the state of Colorado more than $1,000 in state taxes, you will be required to pay state tax payments. 

Keep Diligent Records of Income & Expenditures

If you’re self-employed, the number one thing you can do to point yourself toward success at tax time is to track everything carefully —and by everything, we do mean everything. I addition to keeping careful records of all your income, you need to keep clear, concise records of all expenditures related to your work and business. From travel expenditures, to supply purchases, relevant utility expenditures and income earned out-of-state, the trickiest riddles to solve come tax time have their genesis in disorganization and poor record keeping. 

There are numerous and varied tax-related documents to keep track of if you are a Colorado-based professional who is self-employed. They include: 1099-MISC forms, receipt of sales, paid invoices, receipts, cancelled checks and deposit slips. Self-employed individuals should also track all spending related to business-related travel, transportation, entertainment, and gifts. 

Travel deductions should include even travel by short distances in and around the city where you work. As of 2018, the standard mileage rate prescribed by the IRS was 54.5 cents per mile. Keep in mind, however, that the IRS allowable mileage rates change each year.

When is My Self-Employment Income Tax Eligible?

Your self-employment income is tax eligible the moment you receive it. There is a widespread misnomer that self-earned income is not taxable until you actually cash the check and the funds are physically available. This is not true. There are no tricks to harbor self-earned income to make it less eligible to state and federal income tax laws. In fact, trying to avoid or delay eligible income tax on self-employment earnings can lead to even higher taxes and fees down the road. That’s why keeping your self-employment taxes organized and clear throughout the fiscal year is so key to staying one step ahead. 

How Can Advanced Tax Solutions in Denver Help?

If you’re a self-employed professional in the Denver metro area, the tax professionals here at Advance Tax Solutions can help you with all the legal and financial questions related to your taxes and make sure you submit all the income taxes you owe —without overpaying. If you’re a self-employed professional in the Denver, Littleton or Aurora region who is in a dispute with the the state or federal government over your past or present self-employment tax obligations, Advance Tax Solutions can also work with you to settle your taxes issues in a fair and fast manner. Contact our team today to learn more.

Things to Consider When You Can’t File Your Federal Taxes On Time in Denver

February 6, 2019

Whether you’re an individual taxpayer from Aurora, married filing jointly in Denver, or a small business owner in Littleton, April 15, 2019 should be a date that’s circled on your calendar. That’s the deadline for filing your income taxes with the IRS. Whether it’s from procrastination, laziness, or simply waiting to get all of your 2018 paperwork in order, not all Denver area taxpayers are always ready to go when it comes time to file by the April 15th deadline. 

When getting ready to prepare your federal income taxes this year, it’s important to understand that the recent government shutdown has not impacted this required filing date, and that the date will remain intact even if future government shutdowns arise —so don’t use that as an excuse to file late! 

Whether you’re a Denver-area taxpayer who is currently living abroad, have yet to organize the appropriate forms and paperwork, or simply need more time to file your federal income taxes, Advance Tax Solutions is here to help you navigate the process quickly and confidently without falling subject to fees or audits that can arise when taxpayers or small businesses miss the April 15th deadline. Here are some brief tips on navigating your taxes if you won’t be able to file before the deadline. 

Tax Refund vs. Owing Taxes

If you’re expecting a return from your 2018 income taxes, you’re in luck. Tax returns that are due a refund have until April 14, 2022 to be filed with the IRS before the statute of limitations on your tax return refund runs out. If you file an extension to file, this deadline can be put off until as far as October 15, 2022. If you don't file by these dates, the U.S. Treasury simply keeps your refund as a "donation,” and you waive your right to the refund forever. Individual tax filers and students are encouraged to avoid missing the April 15th filing deadline, not only because it can delay a sizeable refund check, but also because it sets up good taxing paying habits that will serve you well (and prevent you from having to pays fees and interest to the IRS) throughout your adult life and career. 

However, if you believe you will owe taxes from 2018, the situation is an entirely different ball game. The team of tax professionals here at Advanced Tax Solutions suggests you file as soon as possible —even if you can’t pay. The IRS’ late-filing penalty can be as much as 10 times higher than the late-payment penalty, and the longer you wait, the more it has the propensity to increase. In fact, one of the key problems folks don’t realize is the very act of procrastinating about filing your taxes can only add to the amount you owe. Putting off your income taxes doesn’t ignore your tax problems —it magnifies them. 

Filing for a Tax Extension

If you’re a Colorado resident who knows that they won’t be able to file their income taxes on time, you should apply for an extension to avoid any future fees. IRS form 4868 —Application for Automatic Extension of Time To File U.S. Individual Income Tax Return— is the form you need to submit to apply for a filing tension. Form 4868 can be submitted to the IRS in either paper form or online. Individuals who utilize tax processing software services such can often a way to file through your chosen program or tax advisor as well. Filing a tax extension is, and in most cases, an extension is automatically granted. There are no special qualifications, exemptions or circumstances that need to be met in order for you to file form 4868. Both personal and business taxpayers who request an extension are almost always granted one. Keep in mind, however, when filing for an extension you are asked to estimate how much you owe the IRS. 

An extension can also be applied for using the IRS’s online filing program. You can get an automatic extension of time to file your tax return by filing Form 4868 through the IRS website. You’ll receive an electronic acknowledgment once you complete the transaction, which you’ll want to keep with all your  applicable with your 2018 tax records and formds. If you complete Form 4868 online, there’s no need to additionally mail a physical copy, unless you’re making a payment on your estimated IRS balance with a check or money order.

What an Federal Tax Extension Provides

It’s important to understand that an extension only gives you an extended period of time to file your 2018 income taxes. It does not grant you an extension on any prearranged payment plans or future tax payments owed —it merely gives you more time to file your 2018 return. If you owe the IRS for 2018, your tax debt is still due by the April 17, 2019 deadline. Any unpaid balance to the IRS that is in place after the April 17 deadline will accrue interest and penalty fees of 5% per year, compounded daily. 

If you have concerns about your ability to file your 2018 Federal Income Taxes in a timely manner, the team here at Advanced Tax Solutions is here to help. Not only will our friendly associates walk you through your extension application process, we can also provide you with myriad tax filing techniques and advice to set you up for success in this and every tax year.