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Financial
Feb 6, 2023

The Updated Truth about the IRS

Sponsored Content provided by Adam Shay - Director of VCFO Services, Red Bike Advisors

What Have Been the Biggest IRS Headlines in the Last Two Years?

  1. The backlog that the pandemic caused in processing income tax returns and general correspondence to/from the IRS.
  2. That 87,000 IRS Agents are being hired to audit your income tax returns.
There is good news on both fronts.  The IRS is catching up on its backlog and showing recent improvements in allowing tax practitioners to help get tax issues resolved.  They’re still running behind, especially on anything paper filed, but it is getting better.  While the IRS has and will receive additional funding, not all that funding is going to add enforcement agents and the true number will end up being much less than 87,000.  Much of the money will be spent on customer service, technology and infrastructure, etc.  That being said, don’t follow TikTok for income tax advice or you may end up being the subject of an audit.

\What else do you need to know regarding the IRS and income tax preparation as income tax filing season approaches?
  1. The IRS has upped its interest rate to 7% for Q1 2023.  It will get a lot more expensive to underpay or finance your federal income tax obligations.  Remember that if you do an income tax extension at 4/15 it is an extension to file and not an extension to pay.  To be interest free you need to have your 2022 income tax payments done by 4/15/2023.
  2. File electronically when possible.  This will get your income filing on record quicker, refund back quicker if due one, and generally reduce the chances of a great deal of frustration with the IRS via delayed processing and correspondence.
  3. If you have more than just W-2 income, use an income tax professional to prepare and file your income tax return.  The income tax code is complex and ever changing- the right professionals will stay on top of the income tax code and ensure that you are only paying the minimum income tax that you are legally required to pay.  Business owners can leave a lot of money on the table and/or generate notices for themselves if they self-prepared their income tax returns incorrectly.  Business income tax returns are much more involved and require more skill to minimize income tax liability.  For example, on a business income tax return does one know to claimed SEHI or the maximum QBI deductions?
  4. If you encounter an IRS or state correspondence or inquiries, engage a CPA firm that is an expert in tax controversy and resolution.  At our firm we have team members that are Certified Tax Resolution Specialists.  While a lot will depend upon the taxpayer’s history with the agency, we can often get penalties abated.  Offers in Compromise even allow for a reduction in income taxes due from a taxpayer.

Our goal today was to provide you with an update on the state of the IRS and what it means for you.  If you have any questions regarding income tax preparation or IRS/state representation, please feel free to reach out.

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