Tuesday, August 5, 2014

IRS Notice: You May Be Eligible For...a Credit or Deduction?

The IRS sends out notices that you may be eligible for certain credits (for example) that you did not take on your tax return. Actually it is the IRS computer that spits these out. The computer sees certain but not all information and jumps to the conclusion that you may be entitled to something based on the limited information that it uses. Typically these are helpful notices worth checking out especially if you did your tax return by hand. But also it is worth checking out just in case your computer software made an error. A little extra money back from the IRS is a good thing.

Many times however the IRS computer does not see some particular information that disqualifies you from the credit or the deduction.  In several cases my clients living outside of the United States, for example, have not qualified for things like the Earned Income Tax Credit when under the same circumstances living in the US they would have been entitled to the credit. Also, the IRS computer when sending out these notices does not account for the Foreign Earned Income Exclusion among other things.  So often now the IRS sends out these notices but their computers don't see the whole picture.

What is the point of all of this.  The nature of US tax returns is that your whole situation needs to be considered to determine what you can and cannot deduct on your tax return. While your neighbor or coworker may have been able to take a deduction your specific circumstances are different and you may or may not be able to take the same deduction.  Everyone's lives were much more similar back in the 1960's but now life is more complicated and rarely are peoples lives and circumstances similar.

Specifically for you to determine what you can and cannot deduct on your tax return you need to look at all your facts and circumstances. A tax professional will be of great assistance and they will need to ask you many questions and get a lot of information in order to correctly prepare your tax return(s). A good CPA will be very inquisitive and ask for much information. While you would like it to be much more simple, the reality is the world today and our lives are more complicated. So take the time to get it right and avoid frustration later on from other IRS letters disallowing certain deductions your neighbor was able to take.

The CPA Superhero wants to help you to succeed in business, life, and in retirement.  While my main business is preparing tax returns, I also work with clients to setup accounting systems to start, manage and develop their business(es) and develop and implement a financial plan. Contact me using my information below to schedule a free introductory consultation up to a half hour. 

Jeff Haywood, CPA

The CPA Superhero

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My posts contain general information that does not fit every situation, they are not all inclusive, and as always for your tax situation everything "depends on facts and circumstances."  In addition, the information/IRS requirements are always subject to change.  So call me to talk about your specific facts and circumstances and what you want to accomplish.