Little-Known Secrets About the IRS

Little-Known IRS Secrets

While taxes sure can be confusing, many of the rules and guidelines appear to be written in black and white: Collect your W-2s from employers, 1099-B for proceeds from stock sales, 1099-R for payments from IRAs or retirement plans, and so on. Be as precise as possible. Account for all eligible tax breaks. Provide receipts and bank records as evidence. And of course, file by this year's tax date, April 18.

However, there's more to the Internal Revenue Service than what meets the eye. For starters, it is skeptical about many tax preparers. It is more interested in checking for errors on your return if you make over $200,000 a year. And its forte certainly isn't customer service. Read on for a list of things about the IRS that you may not be aware of.

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Little-Known Sec... While taxes sure can be confusing, many of the rules and guidelines appear to be written in black and white: Collect your W-2s from employers, 1099-B for proceeds from stock sales, 1099-R for payments from IRAs or retirement plans, and so on. Be as precise as possible. Account for all eligible tax breaks. Provide receipts and bank records as evidence. And of course, file by this year's tax date, April 18.

However, there's more to the Internal Revenue Service than what meets the eye. For starters, it is skeptical about many tax preparers. It is more interested in checking for errors on your return if you make over $200,000 a year. And its forte certainly isn't customer service. Read on for a list of things about the IRS that you may not be aware of.
1. The IRS doesn... Think hiring a paid preparer will help you file your return with precision and accuracy... and inevitably keep you out of tax trouble? It's not a guarantee. In fact, the IRS recently announced plans to crack down on paid preparers by requiring them to pass a test, register with the government and adhere to "surprise" visits.

Changes won't occur overnight; the IRS hopes all tax preparers will be registered by the 2011 filing season. Regardless, be sure your accountant is legit before you trust him or her with something as important as your taxes.
2. The IRS ignor... If you call the IRS this tax season, there's a chance you'll never reach assistance. A survey turned up results that showed only 7 out of every 10 calls to the IRS were answered. The average wait time for those who did reach someone on the line: 12 minutes.

Surprisingly, it's the IRS' "goal" to respond to just 71 percent of taxpayers' calls, notes The Wall Street Journal's Martin Vaughan. This raises concerns that the IRS is overburdened and lags behind when it comes to customer service.
3. The IRS will ... The secret to keeping IRS auditors away: Earn less than $200,000. Taxpayers making less than $200,000 a year aren't bothered 99 percent of the time.

As for the higher earners, returns showing income of $200,000 and above have a nearly 3 percent audit chance. The percentage jumps to more than 6 percent for returns with earnings of $1 million or more.
4. The IRS will ... Many taxpayers don't realize that if you’re crunched for time or don’t have all of the correct tax forms, you can request an extension (as long as it's done on time, of course). Submit Form 4868 by tax day, and you'll likely be given up to 6 months of extra time to file. For more on how to file for an extension, visit the IRS' web site.
5. Forgot to sub... The IRS could delay the processing of your return, slow down any refund or even disallow a credit if you're missing the identification numbers to support it. Be sure you include your Social Security information if you file on your own. And if you drop off documents to your accountant, also make sure you're not leaving this out. You'll need Social Security numbers for yourself, your spouse and anyone you claim as a dependent -- from infants to elderly parents.

In addition, if you have small children and plan to file for the child-care credit, include the tax identification number of the person or business that takes care of your children while you’re at work.
6. The IRS' char... Tax rules for charitable giving have turned more "stingy," according to the Chicago Tribune.

If you don't have a receipt for a cash donation, for example, you're not entitled to a tax deduction. For any single contribution of $250 or more in cash or property, you must have written acknowledgment from the organization to support your claim. And if you paid $300 to attend a benefit dinner, you can only claim $200 if the dinner was valued at $100.
7. Filing by sna... The IRS has reduced paper-filed tax-return processors and is encouraging e-filing. What could that mean for you? With fewer resources for paper filers, it could take longer this year for the IRS to process paper returns. Perhaps a better solution: File your return electronically.
8. Many refunds ... Many refunds are returned to the IRS each year as undeliverable mail. In Pennsylvania, the IRS wants to give back $6.3 billion in unclaimed refunds, as noted in this article. You can guess how that figure balloons when you account for the rest of the country.

For a quick way to receive your refund, file your taxes electronically and have your refund deposited into your checking or savings account. If you think you missed out on your refund, go to the IRS' secure online tool to try to track it down.
9. The IRS doesn... According to a New York Times article, the IRS collected only about $86 billion in delinquent taxes over the fiscal years from 2005 to 2007. That's about 27 percent less than the $118 billion it originally reported as having gathered. "The report, which is required by law, criticized the IRS for burying the lower figure in a footnote and for not explaining how either number was calculated," wrote the New York Times' Lynnley Browning.
10. IRS audits a... The tax agency increased the number of returns it audited by nearly 11 percent this year, according to the Associated Press. Why? Perhaps it's because tax audits can tap into a whole lot of money that the IRS currently is missing out on.