Only 39 days left to file your tax returns. Here are a few handy tips:
Be careful what company you choose to prepare your taxes.
H&R Block recently announced that it would restate its earnings for 2004, 2005 and the first two quarters of fiscal 2006.
Why? Because it understated its tax liability by $32 million. This isn’t the only time this giant tax preparer reported trouble preparing its own taxes. In June, the company said it understated its tax liability by $129 million because of accounting errors from an acquisition. Maybe they should call themselves H&R Blockheads.
Don’t even joke about dodging taxes.
In a recent “Taxpayer Attitude Survey” by the IRS Oversight Board, 62 percent of 1,000 people surveyed agreed with the statement that “it is everyone’s personal responsibility to report anyone who cheats on their taxes.” That’s up from 53 percent the year before.
Additionally, 88 percent said it is “not at all” acceptable to cheat on income taxes. That figure is the highest since the board began the survey in 1999. Only 3 percent agreed it’s acceptable to cheat “as much as possible.” If you believe this, here’s another tip: Don’t tell the IRS, even in a survey.
Don’t worry. You won’t get audited.
It usually takes rotten luck, bad karma or low intelligence to get hauled in for an audit. The IRS can audit only about 1 percent of taxpayers each year. Last year, IRS officials turned the screws on people making six figures or more. They hit 219,000 taxpayers in this group, up about 32 percent from the previous year but still just a fraction of the millions of people in this group. Among the most common red flags for IRS auditors is unreported income. The IRS gets a form from somebody who claims to have paid a taxpayer, yet somehow that taxpayer didn’t report it. How stupid is that?
It’s never too late to procrastinate.
Because April 15 falls on a Saturday this year, taxpayers have until April 17 to file. If history is any guide, about one-third of taxpayers will wait until the final weeks to start preparing. Millions of others have failed to procrastinate and overpaid their taxes, essentially giving interest-free loans to Uncle Sam. The IRS reports that, so far, 44.5 million Americans have received more than $110 billion in refunds this year, averaging $2,480. This week, incidentally, is National Procrastination Week. But don’t celebrate until next week.
Spare the IRS your dumb arguments.
The IRS has heard it all before, and so have the courts. Do not even suggest that the 16th Amendment regarding the government’s power to collect income taxes was never ratified; that, technically, wages aren’t income; that paying taxes is voluntary, according to the way you read the tax code; or that filling out a tax return violates your Fifth Amendment right against self-incrimination or your Fourth Amendment right to privacy. Frivolous arguments often end in court-imposed fines.
Fines may be bigger than the lies.
Last month, Sydessah Nysessah Lewis, 31, of Pueblo was arrested for filing false- refund claims totaling more than $27,000 over three years. She has yet to enter a plea. If convicted, she faces a $250,000 fine and five years in prison.
You can’t blame your tax fraud on the fraudster you hired.
In January, Paul D. Harris of Elizabeth received a 5 1/2-year prison sentence for preparing fraudulent tax returns. Harris and a co-defendant charged wealthy taxpayers as much as $50,000 to join their organization, Tower Executive Resources. This organization set up shell corporations and offshore bank accounts to hide income. Nine Tower Executive Resources clients have been convicted of tax offenses, too. I think they’d have been a lot better off at H&R Block.
Smile when you pay your taxes. You are probably richer than you think.
The top half of taxpayers – ranked by adjusted gross income – paid 96.54 percent of the taxes in 2003, according to research from Congress’ Joint Economy Committee using the latest available IRS data. This may sound like a gross imbalance, but unfortunately, it doesn’t take much to be in the top half of taxpayers – only $29,019 in adjusted gross income.
To be in the top 25 percent, all you need is $57,343. The top 10 percent, $94,891. The top 5 percent, $130,080. And the top 1 percent, $295,495.
Al Lewis’ column appears Sunday, Tuesday and Friday. Respond to Lewis at , 303-820-1967, or alewis@denverpost.com.
