The Treasury Inspector General for Tax Administration has released a report indicating that the Internal Revenue Service makes little use of bank currency reports. Many Maryland residents are aware that if they deposit more than $10,000 in cash at any one time, their bank will send a report of the transaction to the IRS. Chances are that the IRS will never look at a particular currency report.
If you're a business owner, receiving a letter from the Internal Revenue Service or Maryland State Department of Assessments and Taxation can be intimidating. It may be tempting to ignore the inquiry in hopes that it's a minor issue that can be addressed later, but that's exactly the wrong approach. The best way to minimize exposure and get back to conducting normal business operations is to immediately find out the exact nature of the inquiry.
Small mistakes can be costly when it comes to filing state or federal income taxes. Though most people endeavor to pay as little in taxes as possible, many filers are still overpaying every year. Maryland residents can avoid such mishaps by remembering a few tips.
People in Maryland might have heard that they should keep copies of their federal tax returns for three years. This guideline represents a minimum recommendation that does not necessarily protect people from all inquiries from the Internal Revenue Service. Although the agency generally has three years to decide if it is going to audit a person or require additional tax payments, some situations extend the statute of limitations.
Although individuals in Maryland only face a low chance of getting audited by the Internal Revenue Service, not all tax returns are created equal. The IRS uses computers to analyze tax returns and flag some for closer review based on criteria meant to identify potential problems. Self-employed income, higher-than-average itemized deductions, rental properties and home office expenses all represent categories that could cause the agency to scrutinize people's tax filings.
Maryland residents who have unresolved tax issues may benefit from using the services of both accountants and attorneys. The services that they offer complement each other. In many cases, both the client and the accountant benefit from working with an attorney.
While most Maryland residents may be nervous about an IRS audit, the chances of actually being audited are relatively low. Only 1 percent of those who make under $200,000 will have their returns examined. Of those who make more than $1 million, roughly 12 percent can expect to have their returns examined. It is also important to know that no single deduction is guaranteed to trigger an audit.
As a general rule, the IRS says that Maryland residents who have side gigs that lose money are engaging in hobbies as opposed to businesses. This means that they can't use that loss to offset any other income that they may have generated. In past years, individuals could deduct hobby expenses that were more that 2 percent of their adjusted gross income up to the amount of income the hobby generated.
Maryland business owners may not like the thought of an IRS audit. In addition to the time needed to resolve the matter, a company could owe more money to the government. However, it is important to remain calm and polite throughout the process, and it is rarely a good idea to go into a meeting with the IRS alone. Instead, bringing in the company's accountant can be helpful in answering the government's questions.
For most Maryland residents, the idea of taxes becomes important once or twice each year, then it moves to the background again. Following filing though, a few people in the state can expect letters from the Internal Revenue Service. Getting a letter from the IRS is often a stress-inducing event, but it does not have to be. Indeed, on average, less than seven people out of a thousand will be audited. There are other reasons the IRS might contact a taxpayer after returns are filed.