Rebeck & Allen

Detroit Tax Law Blog

What to do when the IRS contacts you

Having any sort of contact with the IRS can be terrifying. When a notice arrives by mail, you may anxiously await learning of an audit or other bad news.

However, you may receive a notice from the IRS for many reasons. While most Michiganders prefer to only hear from the IRS when they receive their tax refunds, the government agency may have other purposes for contacting you. When you do receive a letter in the mail from the IRS, keep these four considerations in mind:

Why is it importance to keep good business records?

As a Michigan business owner, you probably know that there is a lot of paperwork involved in keeping your business running. It does not matter how small or large your company is, good record keeping is essential. If you fail to keep good records, it will catch up with you. Most likely, you will end up in trouble when tax season rolls around. However, being able to properly file your taxes is only the tip of the iceberg when it comes to the benefits of good record keeping.

The IRS explains that keeping good records lets you stay on top of money owed to your business and money your business owes to others. It enables you to keep your credit solid while also ensuring you collect on debts owed. Good records also let you gauge how well your business is doing. You should be able to check your records at any point and see if you are doing great or if your business is in the red. This allows you to react accordingly.

Is my ex entitled to some of my tax refund?

In Michigan, it isn't normal for ordinary citizens like you to end up in tax court. The number one reason you might? Getting your assets, including potential tax refunds, tied up inside of the messy business that is divorce.

FindLaw takes a look at how different things can affect your taxes, including the dissolution of a marriage or divorce. People have plenty of questions when it comes to this topic. Who gets the refund? Do you legally owe your ex anything? Can they possibly take you to court to fight for a share? Is there a difference between being in the middle of a divorce or already having processed through it?

Why did the IRS take my refund?

Most people around Michigan breathe a sigh of relief after April 15. Tax season can be a stressful time but receiving a refund from the government can be a significant benefit that makes all of the stress worth it.

However, people might start to worry if their refund does not appear in the mail after nearly 20 days.

How to control your taxes as an independent contractor

As an independent contractor, you have the freedom to access your finances and allocate them however you choose. Since federal taxes, state taxes, Medicare and Social Security funds are not taken out of your paycheck, you have more flexibility to play around with your finances up front. Yet when tax time comes around, it is important that you are not left struggling to come up with the money necessary to pay back the state and federal government. Organizing your finances as a self-employed contractor is vital, and can make all of the difference when annual tax time arrives.

As an independent contractor, the money you make may go into a business account rather than your personal checking account. Business expenses may then be taken from the account and you may pay yourself from the account as well. When you prepare your taxes, the expenses used for your business may be deducted from your business income, thereby lowering the taxable amount. It is important to understand what type of business expenses qualify for business deductions and what items should be left for personal use. Make sure that you document your business expenses in case more specific clarification is needed.

What happens during an IRS audit?

Getting a notice that the IRS is conducting an audit of your tax returns is a nerve wracking experience. Pretty much nobody in Michigan or anywhere else for that matter want to face an audit. However, they happen. The IRS conducts these checks regularly on businesses and individuals. They want to go over what you claimed on your tax return to ensure that you do not owe or are not owed any money.

According to the IRS, all audit notifications come by mail. They will never call you or contact you in any other way. Many times, you can conduct your whole audit through the mail. In some cases, you may need to have an in-person interview. This might happen in the nearest IRS office, at your home or at another locations, such as an attorney's or accountant's office.

Check the fine details before filing a tax return

Residents in Michigan know that the April 15 deadline for filing their annual federal tax return is just around the corner. For people who have not yet filed their tax returns, it is important not to rush to get these in and instead to make sure they pay careful attention to the fine details. Failure to do this may contribute to an error down the road.

Some of the things people need to watch out for are essentially errors that anyone can make. The transposition of numbers in a Social Security Number, a bank account number or a bank routing number are just a few examples of common errors according to Money Crashers. When it comes to numbers, basic calculations that are off can skew an entire return. It is also important that people pay close attention to the proper spelling of their names and to ensuring the names listed on their tax returns match those on other tax documentation.

What is a side hustle?

Your primary job in Michigan may not be enough to pay the bills, or you may not have enough money to put aside savings for a planned purchase, retirement or emergency. If that is the case, you may take on a second job to make up the difference. According to The Motley Fool, the term for this is a side hustle. Anyone, at any age, can take on a side hustle despite a stereotypical association with millennials. The top-earning age group for side hustles is people aged 53 to 62. 

A side hustle is not necessarily all about the money, though. Some people are able to take a passion project or hobby and turn it into a money-making concern. They do it primarily for enjoyment; the money is a secondary consideration. In some cases, the side hustle turns out to be so successful that it has the potential to become a primary job. 

What the IRS is looking for in a business audit

Audits are a common fear among all taxpayers. Business owners work hard year-round to maintain their tax records to remain in good standing with the IRS. There are few pieces of mail to receive that will send your heart racing like a letter from the IRS.

Hopefully that day never comes but that doesn’t mean you shouldn’t prepare for one. The internet makes it easy to compile and adjust your folder of records going back four years that would interest an auditor. First, you need to know what the commonly reviewed records are:

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Rebeck & Allen
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Southfield, Michigan 48076

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