Does the Method of Tax Filing Change IRS Audit Potential?

Posted on April 15, 2014 by Dr. David Edward Marcinko MBA MEd CMP™

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Will that be a Paper or Electronic Tax Return?

[By Dr. David Edward Marcinko MBA CMP™]

dr-david-marcinko5I’ve prepared and filed personal, medical practice as well as PC, S and C corporate tax returns for many years now. I bought my first computer in 1988, participated on dial-up bulletin boards with modem soon thereafter, and have been on the internet since 1995.

But, I do to have a definitive answer to this question.

Two Competing Theories

Some CPAs suggest filing the old-school way if you’re worried about an audit. Why? Paper filing means more work for the IRS to access all the information in your return. Others disagree:

Philosophy in Favor of Paper Returns

Some suggest that a paper tax return might reduce your chance of an audit because the IRS must transcribe your information into a computer by hand. The IRS does not transfer all of the information in your return as a result of the prohibitive cost of transcribing returns. When you file a return electronically, a computer instantly analyzes your return for errors and discrepancies.

Source: http://www.ehow.com/info_8488086_filing-increase-chances-irs-audit.html#ixzz2yh9m8pEy

Philosophy in Favor of Electronic Returns

Filing an electron tax return reduces the number of math mistakes on your return and the chance that the IRS makes a mistake when it transfers data by hand. Overall, electronic returns contain fewer errors than paper returns which increase the chance of audits. Also, the IRS may perform an automatic audit when its electronic scanning system cannot read your handwriting.

Source: http://www.taxdebthelp.com/tax-problems/tax-audit/irs-audit-statistics#ixzz2yLVTp0l1

Tax

Assessment

Remember, your duty as a taxpayer is to be truthful and accurate, but you don’t have to make it easy for the IRS.

Conclusion

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e-Filing Tax Season is Now Open

Posted on January 25, 2011 by Dr. David Edward Marcinko MBA MEd CMP™

About IR-20 11-5

By Children’s Home Society of Florida Foundation

In a flurry of information letters, the IRS just announced that e-Filing is now open. According to IR-2011-5, the benefit of e-filing is that any taxpayer may receive faster refunds and ensure that their tax return is accurately reported.

The Commissioner Speaks

IRS Commissioner Doug Shulman stated, “IRS e-File is the best option for everyone, especially for people impacted by recent tax law changes. e-File ensures people can file accurately and get refunds quickly. With a new legislative e-File mandate for tax preparers, we anticipate that more tax return preparers will be using e-File this year and we urge people who prepare their own taxes to give it a try.”

Methods of Filing

The e-Filing may be accomplished through three different methods. Tax return preparers may e-File, commercial software may offer the option or there is IRS Free File. The Free File program is available on www.irs.gov. Taxpayers should click on “Free File” and will be permitted to access tax software to prepare their returns. Free File is available for taxpayers with 2010 adjusted gross income of $58,000 or less.

In the view of the IRS, Free File is “perfect for first-time filers, families looking to save money or older Americans adept at using the Internet.”

e-Signature Needed

Those who file electronically will also need an electronic signature. The electronic signature requires a five-digit personal identification number (PIN). There are three ways to obtain your PIN.

1. Self Select – You may use your tax software and select your own five-digit PIN. If you used a PIN in 2009, you may use that number. Alternatively, you may enter your adjusted gross income from your 2009 return to obtain your PIN. The PIN can be a five-digit number, but may not be all zeros.

2. Practitioner PIN – If you are using a paid tax preparer, you may sign IRS Form 8879 and authorize your paid preparer to generate your five-digit PIN. The paid preparer will retain Form 8879, but will not mail it to the IRS.

3. IRS Issue of PIN – If you do not know your 2009 adjusted gross income or your 2009 PIN, the IRS will request a temporary Form 8879(EFP). The Electronic Filing PIN may be obtained using your tax preparation software or through http://www.irs.gov. With the Electronic Filing PIN you may complete your electronic signature.

Military

If your spouse is a military person serving in a combat zone, you are permitted to use the self-select PIN. You will need to obtain IRS Form 8453, attach a Power of Attorney and mail it to the IRS.

Assessment

This program may also be ideal for FAs, medical students, interns, residents, fellows, nurses, new practitioners and all allied medical professionals who qualify.

Conclusion

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Filed under: Accounting, Information Technology, Taxation | Tagged: , , , , , , , , | 3 Comments »