Over Reporting Your Income? IRS May Find Out And There Could Be Consequences.


Just read an interesting Tax Court opinion (Cadet, TC Summ. OP. 2015-39) about over reported income.  The taxpayer, who was called ‘a low income filer with very little count_moneywage income’, claimed a profit from a side-business of $17k from selling items at a flea market.  The taxpayer would have been paid $2,100 in self-employment tax, but the extra income would have resulted in about $8,000 total from the child tax credit plus an increased earned income credit.

Normally a tax return is first reviewed by the IRS computer system and, if needed, by reviewers.  In this case, the computers noted the ‘excessive’ income based on the taxpayer’s history and the computers froze the return.  During a review, the taxpayer couldn’t substantiate most of the profit (not enough deposits into bank accounts I’m guessing) so the IRS only allowed what was substantiated and only gave $700 in tax credits.

What’s interesting to me is I’ve  heard of the IRS computers looking for under reported income, but not over reported income.

alimony-iStock_with gavelSomething that wasn’t mentioned is if the IRS charged the taxpayer a civil penalty (usually $5,000) for filing a frivolous tax return – in my mind, it would have been warranted!  That’s the main penalty for filing a false return.

Kudos to the IRS for catching this.  We normally hear about cases of the IRS not catching false tax returns so good to hear a positive case.

 

Cheers!

Thomas C. Hodge, CPA
President

Hodge Group LLC
3943 N Austin Avenue

Chicago, IL  60634

773.237.6369

www.thehodgegroup.com

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Earned Income Tax Credit Awareness Day


There is a federal tax credit (called the Earned Income Tax Credit or EITC) that may be available for individuals and families who earn below a certain dollar amount.  The calculation for the credit is a bit complex so the IRS is having an ‘Awareness Day’. This is one of the tax credits that can increase your refund (or lower taxes owed) and, unfortunately, is missed by about 20% of eligible taxpayers.  So, if you don’t have children and earn less than $13,980 or have children and earn less than $50,270, you may be eligible for the EITC.

You can find out information about eligibility, dollar limits and other information at this link.  There is also an automated assistant that can help walk you through the eligibility requirements.  If you think you might be eligible, check it out!

Tax season is up-and-running!  If you would like my assistance with your taxes, or just have questions, feel free to contact me.

Cheers!

Thomas C. Hodge, CPA
President

The Hodge Group
3040 N. Menard Avenue
Chicago, IL 60634

773.237.6369

http://www.thehodgegroup.com

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