Acclaim Professional Services, Inc
July 2012
404-771-6407
Fax 888-704-9355

Happy Independence Day! As the summer season heats up, so does the election year campaigning. And while we cannot control the outcome of this discussion, there certainly are things each of us can do to improve the management of our own personal finances. Outlined here are a few things to consider.

Will you be Audited?

Here is what is happening now
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If you have not been notified of an audit the later of three years after the filing deadline of your tax return or when you actually filed the tax return you are usually home free. There are two main exceptions to this rule.

1 If the IRS audits a tax return and discovers an error of more than 25% of your claimed tax obligation they can go back six years.
2 If the IRS deems there is fraud involved, they can go back indefinitely.

What are the Chances?

Every year the IRS publishes their examination statistics. Provided here are the last two years of published information and a look back to 2008 to see any trends:

Audit Rate Statistics for INDIVIDUALS
Fiscal Year Year 2011 2010 2008
All Individual Tax Returns
1.11%
1.11%
1.00%
No Income (AGI)
3.42%
3.19%
2.15%
Income under $25,000
1.22%
1.18%
.90%
$25,000 - 50,000
.73%
.73%
.72%
$50,000 - 75,000
.83%
.78%
.69%
$75,000 - 100,000
.82%
.64%
.69%
$100,000 - 200,000
1.00%
.71%
.98%
$200,000 - 500,000
2.66%
1.92%
1.92%
$500,000 - $1 million
5.38%
3.37%
2.98%
$1 million - $5 million
11.80%
6.67%
4.02%
$5 million - 10 million
20.75%
11.55%
6.47%
$10 million and over
29.93%
18.38%
9.77%

Note: These audit rates are stated as a percent of total tax returns with "total positive income" (TPI) as claimed on individual tax returns. In general the examinations are for tax returns filed in the previous calendar year.

Source: IRS Data Books.

Observations:

Circle Audit rates are up dramatically with the exception of those with incomes between $25,000 - $50,000.
Circle Upper income taxpayers can almost assume they will be audited every 3 to 5 years.
Circle Those with incomes over $10 million have seen their audit rate go up over 300%
since 2008.
Circle In addition to the above statistics the IRS audits over 134,000 taxpayers where no tax return is filed.

Play it safe

Always retain your tax records and support documents for as long as they may be needed to substantiate your tax return. Make sure you consider any state record retention requirements as you review when it is safe to destroy old records. Remember some records need to be retained indefinitely. This includes, at minimum, copies of original tax returns, legal documents, and real estate transactions.

Looking for a Job?

Ideas to make it easier

The job market remains tight for everyone, but especially so for recent college graduates. Because of this, too many job applicants end up with a position that does not meet their goals. So what can you do to make the job search process work better for you?

1 Network, network, network. As any marketer will tell you, if you don't have awareness even the best product will not be purchased. In a job search you are the product, and luck has nothing to do with building awareness. You just need to get over the fear of networking and be determined to make as many connections as possible.
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2 Position yourself. After awareness you must know how to break away from the crowd. What can you do to stand out? Why should an employer talk to you versus the other 100 applicants? Make sure your resume is targeted for the job/position you are looking for and be willing to be flexible to create a "resume for one".
3 Brevity is a gift. Decision makers are busy, especially ones that can make the key hiring decision. Rehearse a summary statement to tell your network and perspective employer what you are looking for, your short terms goals, and how you can help them.
4 Know more than the next guy. Once you know what type of job you would like, spend the time to find out which companies you would like to target. Conduct research on the target companies and be prepared to show your knowledge when you walk in the door.
5 Keep making your point of difference better. While looking for your chosen position, be willing to continue to make yourself better in the eyes of your target employer. Consider taking freelance work in your chosen career. Volunteer for a non-profit in the area of your choosing, work part-time, or take extra course work. For example, volunteer to do the books for a youth soccer club as you prepare for an accounting career, or write copy for your church web site or other charitable organization if journalism is your chosen career path.
6 Be gracious. Always send thank you notes or emails. The more personal the better. Hand written notes are the best, especially in this digital era.
7 Make contacting you a breeze. Create and hand out business cards that look professional. Have all your contact information on the card.
8 Review your digital reflection. Conduct a find on yourself on the internet. What you find is what your target employer will find. At a minimum make sure what is visible does not hurt you. But even better, have what is viewable support your desired profession.
9 Leverage resources. Join job search groups and use online tools to make yourself even more available to prospective employers.
10 Create a team. Finding a job is very frustrating. It can be summed up as a vast collection of "no's" as you are turned down with one concluding "yes" as you accept a job offer. To help combat this, consider building a team of supporters that will help keep you on task, motivated, and generally act as a reliable sounding board. This also includes having quality pre-selected references lined up.

Example: A recent MBA student really wanted to work in a consumer packaged goods company as a marketing manager. The hopeful employee's target company's HR department had a policy to only look at graduates from three schools and his was not one of them. What to do? Through networking our candidate was able to get an audience with a marketing director for an informational lunch. In the meantime, our candidate researched the company, discovered they were having a problem with one of their product lines, then spent the time developing a marketing plan to attack the problem. During their informational meeting, the plan was given to the director to pass along to the right department. Free work? You bet. Did he get a job? You bet.

Deducting Job Hunting Expenses
If you are searching for a new job in your present line of work, the following expenses are usually deductible even if you don't end up with the job: Health care reform heats up
Circle Costs to prepare resumes and letters including typing, stationery and postage.
Circle Fees paid to employment agencies, recruiters, and consultants
Circle Transportation to interviews including out-of-town lodging
Circle Meals while out-of-town for interviews or entertainment related to the job hunt are deductible at 50%
Circle In-town and long distance telephone/cell phone bills

Remember however, that these expenses combined with other miscellaneous deductions are subject to reduction equal to 2% of your adjusted gross income.

Reducing Taxpayer's Tax Burden

There's a form for that?

401K fee disclosures delayedIs there a tax form you find confusing? Are recordkeeping requirements necessary to support a deduction overwhelming? The IRS wants to know your ideas to help make the process easier for everyone. So yes, there is a form for that: Form 13285A.

While it is a bit ironic that the form to "reduce the burden" to file taxes is the longest and most complex form number in the IRS library, there is a group in the IRS that is tasked with making tax filing a little less cumbersome.

Per the IRS the "Taxpayer Burden" is defined as;

"the time and money taxpayers spend to comply with their federal tax obligations."

So if you're interested in sharing ideas feel free to give them to the IRS. Who knows, the IRS may choose your idea and create an initiative to implement it. The IRS will look at your idea and evaluate it based upon the following criteria:

Circle Determining the number of taxpayers impacted;
Circle Quantifying the total time and out-of-pocket savings for taxpayers;
Circle Evaluating any adverse effect on IRS voluntary compliance efforts;
Circle Assessing the feasibility of the initiative, given IRS resource limitations; and
Circle Tying the initiative into IRS objectives.

Are you ready to fill out the form? There are a few things to consider:

1 Don't give them your individual gripe or problem
2 Remember the IRS cannot change the tax law, only how best to implement it
3 Ideas can be for individual or business taxes

Who knows, maybe you can make a difference.

As always, should you have any questions or concerns regarding your situation please feel free to call.
 
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