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IRS Tax Return Audit Help – What to Do If You Get Audited

Even if you try to avoid tax audit red flags to avoid the attention of the IRS, the fact is that around 1% of all US taxpayers will be audited each year. While the IRS will usually only audit your tax return if they think they have found a glaring mistake and can collect money/penalties from you, sometimes the simplest error can produce a letter or a visit from the tax man. But just because you are being audited doesn’t mean you have to be scared to prepare your information and present it when asked! There are three different kinds of audits, including a correspondence audit, a field audit, and an office audit, and all will have different requirements for you to fulfill depending on the circumstances. So here are some tips for what to do if you are audited by the IRS:

  • Be sure to respond to their inquiry. Putting off a response (or ignoring it altogether) will only lead to more problems with them which will not go away no matter how hard you try to pretend it will. When you get a notice from the IRS, respond to it ASAP. They will appreciate it and it will give you more time to prepare any documentation you may need to provide.
  • Consider hiring a tax professional or attorney to help you out. If you aren’t sure about anything the IRS is asking you about, you may be better off hiring someone who can help you through the audit.
  • Get organized. Make sure all your documents are organized and that you bring everything that the IRS has asked for. Tax forms, records, receipts, etc. – bring it all but only what they requested, and make sure to bring copies to leave with the agent if so requested. Do not give them your original documents, as if they happen to lose them you are out of luck. It’s your responsibility to have everything to back up any of your claims, not theirs.

  • Know the information for the tax year back and front. If your tax return was 100% honest and correct, this shouldn’t be a problem at all. But make sure to review your return and know all the information on it that you provided in the first place.
  • Be professional with the IRS agent. Just because their day job involves the much-dreaded tax agency doesn’t mean they aren’t regular people too. Be nice, be courteous, be professional.

According to H&R Block, the tax returns most likely to get audited are returns with the Earned Income Credit claimed or returns filed with Schedule C, Schedule E, and returns with Form 2106. So if your tax return includes any of these forms, make sure you watch out for the 14 IRS Tax Audit Red Flags I mentioned earlier that could trigger an audit. With tax time coming up fast, now is the time to get organized and file those taxes correctly and honestly. That’s the best way to avoid an IRS tax audit!

(photo credit: alancleaver_2000)

taxes
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Downsizing My Home and Moving to New Mexico, Yet Again

Remember when I wrote about downsizing my apartment to save money? And then I moved again soon thereafter? I know, I know – it seems like I am always moving around. And truth be told, I am; I have already moved three times in the past three years. 2011 will almost definitely see me move once more, as I have decided that my trial experience of living in California again isn’t worth what I would have to do in order to afford it and live comfortably the way I want to live. Everything in California is more expensive than almost everywhere else I would ever consider living: gasoline, groceries, utility bills, taxes, car registration fees, home rents, etc. – the list goes on and on. Sure, the weather can’t be beat, but when you have to work extra long hours just to make rent, well, it’s not worth it to me. I know it’s counter to the “American Dream” to not really care about making a lot of money or buying a big house, but those things just don’t interest me. I would much rather live a life of my own choosing on my own terms, and to do that requires me to live somewhere a lot cheaper than California. So 2011 will see me moving back to where I originally went to escape it all – New Mexico.

New Mexico has all the things I want for my life — stunningly beautiful views, reasonable prices on homes & land, dark skies, quiet nights, and a stress-free existence. I don’t want to work a 50 hour week just to make ends meet and pay for my house. I want to work on my own schedule when I feel like doing so, and yet still have some money left over for life experiences. Experiences are much more important to me than “stuff”, so I would much rather drastically reduce my living expenses in order to live the kind of life I want to live. Why am I writing all of this down?

Because I get emails all the time asking about reducing overhead, moving to cut expenses, and how to live a simpler, more fulfilling life.

I have realized, through experimenting over the last couple of years with different living conditions/locales/work situations that what I want is the simplest life possible, in a beautiful quiet location, which doesn’t require me to work doing anything that I dislike. So in order to continue working my dream job as a self–employed freelance writer and web developer for many years to come, I need to reduce my expenses drastically.

I keep revisiting this subject because it is near and dear to my heart. Of course, my choices are not for everyone, and that’s A-OK. Other people’s choices aren’t for me either! But I write about this stuff to encourage you guys to take a look at how your life is set up, evaluate how you feel about it, and then to make any changes if you think you should. We all only get a limited amount of years on this planet; so make sure you are living the type of life you want to live and not the kind that others think you should be living.

(photo credit: aldenjewell)

Lifestyle
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How to Buy a Good Mattress for Cheap

There truly is no sane way to go about buying a new mattress for your home. You would think it wouldn’t be that difficult of a process, seeing as how mattresses are advertised for sale almost everywhere on every single day, but the truth is that it can be a very arduous process. I am betting that you see those ads on TV or in the paper which claim that “We’ll beat any advertised price or your mattress is FREEEEE!”, right? Well, guess what – your mattress will never, ever be free. Ever. Why? Because almost every retail store which sells mattresses has their own name for the same mattress as other stores. So Store X will call their mattress “Sleepytime” and Store Y will call theirs “Snoredom”, but the mattress is probably the same model from the same manufacturer. By coming up with their own name for the mattresses, it makes it much harder for you, the consumer, to shop around and compare — never mind get a mattress for free because of a higher advertised price. So, how would you go about finding a good deal on a mattress if you cannot comparison shop?

Compare mattresses in a favored store or local mattress shop that you know has reasonable prices.

While you cannot compare mattresses from different stores, you can compare price points for low-end, middle, or high-end mattresses. So your best bet is to pick a store you like to shop in and support and find the kind of mattress that you prefer. Do you like to shop in Sears? Do you have a Sears credit card? Is there a sale at Sears right now? Then maybe you should head to the mattress department in Sears to check out what they have to offer. But instead of thinking about how their prices are when compared to another store, you can probably assume you will pay a reasonable price for whichever mattress you prefer. So, it’s time to start testing mattresses to find the one that suits you.

With the incredible range of support, sizes, comfort, materials, and guarantees in today’s mattresses, it may take you a little while to find the one that fits you (and possibly your partner, also) perfectly. Take as much time as you need to lay on the mattresses, jump on them, take a nap, feel the materials, ask questions, etc. as you need — buying one is a huge expense that only happens about once every ten years or so. You have every right to embarrass yourself, your spouse, and even your kids when testing out different mattresses for comfort! The retail workers have seen everything, so don’t be afraid of them. In fact, if you feel the person helping you isn’t that knowledgeable in the different mattresses, ask for a new salesperson. You need to deal with someone who is honest and who will know the answers to any questions you may have.

My last mattress was a $2,500 mattress that I got on clearance for $1,200 which is still fine today over 4 years later. You do get what you pay for, so if you buy a cheap mattress you have to expect that it won’t be comfortable for very long and will need to be replaced sooner rather than later.

Pick a store, compare the mattresses in that store, ask questions, watch for sales, make a fool out of yourself — that’s how you buy a mattress. Happy shopping!

(photo credit: Eric__I_E)

shopping
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Do You Still Write Paper Checks?

I write just one lonely paper check per month. My landlord is the lucky recipient of said paper check, and I write him this paper check because I usually hand it to him in person. I could have my bank, Charles Schwab, send out a check each month to him without me even having to do anything, but I like the act of paying the man directly for his house, as he worked really hard on fixing it up before I moved in. All of my other monthly bills, from Charter Cable to AT&T to my local utility companies, are charged directly and automatically to my Amtrak Rewards credit card each month, and I have four automatic payments sent to the card each week which pay off the total of my bills for the month. This method helps me out in several different ways:

  1. My bills are never paid late, even if they get lost in the mail. (Granted, I don’t even get paper bills anymore, but you get the idea.)
  2. I get miles in my Amtrak account, and since traveling by train is my favorite way to go, this helps get me free tickets.
  3. I don’t ever have to worry about running out of or ordering new checks.
  4. I never have to buy postage or stand in line at the post office.
  5. My checking account number isn’t floating around out there on too many checks.
  6. I leave a much smaller environmental paper trail in my wake.

I am not normally a stickler for privacy (although I guess I should be), so number five doesn’t bother me too much, but I was taught to think about that from a very young age. The things that do bother me, though, are the environmental concerns of the millions of paper checks written and disposed of each day along with wasting money on postage. So by only writing my one paper check per month, or just twelve of them per year, and instead doing as many financial transactions online as I can, I am able to save money, reduce waste, earn free travel, or waste any time. Seems like a win-win-win-win all around, right?

That all being said, I have some relatives who still write checks to each bill that arrives in the mail rather than switching to online banking/bill pay, and some that still write checks for groceries or goods at their local stores. Not sure why they are hesitant to make the switch, since online banking is easier in every way, but I figured I could bring it up here to see what you guys had to say about the subject. Do you still write a ton of paper checks every month? If so, why haven’t you made the switch to online bill pay? Privacy concerns? Technology fears? A longing for the old days?

I am really curious as to any reasons that some readers may have, so please – let us all know in the comments. It may give me tips which will help me convince the few stragglers in my family to switch over!

(photo credit: CarbonNYC)

banking
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Be Your Own Boss – 10 Reasons Why I Love the Benefits of Being Self-Employed

As many long-time readers of any of my sites may know, I have been self-employed for about 5 years now. I left corporate America to strike out on my own, and I hope to never ever look back. Sure my income is a pittance compared to the money I was making working for “The Man”, and I definitely don’t live anywhere near as care-free as I used to, but I have many reasons why this is perfectly fine with me and is a trade I consider totally worth it.

I’m probably going to have to work into my retirement years unlike many of my friends who have been putting aside a ton of money, but the difference is that I won’t have just spent 45+ years doing something I hate just to retire “on time” in old age. Of course I can’t say that everyone hates their job, but I rarely ever hear someone say that they love what they do from 9-5 Monday through Friday, and I refuse to let that be me. So with that in mind, and maybe to encourage any of you thinking of making the switch to self-employment to go ahead and do it, here are 10 things I love about being self-employed.

1. The ability to control my own destiny. I make my own hours, my own choices in projects I will take on, and I take time for myself when necessary.

2. The concept of a “secure” corporate job is a myth not to be trusted anymore. No matter your position or employer, your last day could be today — there is no more corporate allegiance to employees.

3. I can travel at will, taking my job with me. Whether to the coffee shop or to the other side of the world, I have free will to go where I want when I want.

4. If I want a day off, I just take one.

5. If I want a month off, I just take it. No waiting for corporate sabbaticals, the unemployment office, or a lottery win to give myself any much needed time off from work. Most European countries have it right in that they require companies to give workers much more time off than we get here in the U.S., as time off for responsible employees makes for much happier employees.

6. Most of my work days I do have to hustle to make enough money to live on. The old days of boringly staring at the clock until 5pm in my over-sized office are gone for good, thankfully. There is nothing worse than being bored somewhere that you have to stay at at all.

7. My efforts online will usually pay out more than just once. What I mean is that for almost every article I publish online, regardless of the subject matter chances are I will continue to earn some income from it for at least a few years if not longer.

8. No more commuting. I hated commuting, especially here in Los Angeles. My commute now is from my bedroom, to the kitchen for coffee, and to my office in the other bedroom… all while in my pajamas.

9. I am voicing my opinion and getting paid for it. How many people get to do that for a living? Sure, I’m not a political pundit appearing on CNN or an entertainment reporter showing up on Regis and Kelly, but my work is seen by thousands and thousands of people each and every day, many of whom take the time to let me know how it has helped them. You just can’t beat that reward for doing your job, and it’s something I never received in corporate America.

10. I’m happier than I ever was reporting to my desk at the office.

Once one can eliminate money as the sole reason to continue working at a job they aren’t happy with, the options are limitless. In the end, all the money in the world isn’t going to make you happy and/or help you live to 200 years old to enjoy everything you accumulate. I have gladly traded a high income for a much better quality of life that works for me; could it work for you?

Have you made the jump already to self-employment? Thinking about it? It’s not for everyone, that’s for sure, but I bet there are a ton of you out there who wish you could ditch the corporate job for something more fulfilling. It’s all about putting the idea of “I need to make a ton of money” to the side and instead concentrating on what would make you truly happy. What do you think?

(photo credit: mudpig)

working
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