Is Your Financial Planning Tax Compliant? (Part 2)
Deductions, Credits, Miscellaneous Income and Personal Financial Planning
Tax rules change every year. Some of them are related to specific events such as Hurricane Katrina or the California fires, but others are more enduring moves to help you save on taxes. Many concessions are time-bound: the best credits for new cars and trucks with hybrid engines last only for the first few units sold, and taper off thereafter. You must join the queue at a friendly auto dealer now, or pay more!
Staying in touch with the IRS is not enough: implementing their missives means that you must develop the skills of a top-drawer clerk. Collect every bill, voucher, cancelled check, and any other paper with numbers, and store it for at least three years-more if you acquire major assets such as a house. Tax examination is like an unforeseen lie on an Emergency Room table. You never know when strangers will demand to look under your skirts!
This is why you should also be a great notary. Collecting supporting papers for all the deductions and credits in your tax return is no good if you cannot explain why you ordered a second beverage at lunch on a business trip to a hick town in the last century. You are in good tax shape if you keep your records updated daily, but anything less than once every Friday afternoon is surely asking for trouble!
Tips for Securing Fully Tax Compliant Financial Planning
Another category of reasons for serious disruptions of financial planning is that we forget about some revenue streams when briefing tax preparers, or may even be ignorant of the fact that some forms of earnings are taxable. Monies from second vocations and hobbies, offering products and services to associates or friends for free in return for similar offers, cash values of awards and contests, as well as winnings from gambling, must all be reported and accounted for in each year’s tax return. Tax gaps generally arise because citizens are unaware of some elements of their taxable incomes, but the IRS has to be heartless in tracking down such unpaid taxes. There is no minimum amount which can remain off the income lines of a tax return.
How confident are you about the tax compliance of your financial planning? It would be futile to ask if you fear the IRS knocking at your door, but do you think that your returns and books will stand up to a professional examination? Join our forums for regular updates on changes in the IRS, and please share your learning from past examinations and audits. Come on board and starting posting today!