Tag Archives: hope

5 Ways to Stay off The IRS Audit Radar

Millions of Americans filed their 2020 taxes and a handful of some will be picked out to be audited by the Internal Revenue Service.

In 2019,  0.45% of the individual tax returns were audited, according to agency data. The rate of audits per year has significantly dropped in the last decade due to staff and budget cuts. But certain red flags may make you more likely to fall into that unfortunate group, experts said.

If the IRS sends you an adjustment letter when you made a miscalculation or underreported small amounts of your income, this is not an audit. A correspondence audit — the lowest form of an audit and not a full examination — is performed via mail and may require you to provide additional information. But a correspondence audit can turn into an in-person audit if the issues become more complex.

Here are five ways to avoid tax scenarios that catch the IRS’s attention in the first place.

  1. Underreporting income – Underreporting income would be the first red flag. Unintentionally leaving out a small portion of your income may not get you audited. But if there’s a bigger discrepancy between the income you actually earned and what you reported on your return — and if it’s intentional — chances are higher that you may get audited.
  2. Overstating your tax deductions – Whether you’re claiming business tax deductions like meal and entertainment expenses or personal ones like charitable donations, you may hear from the IRS if the claimed amount seems off based on your income. The IRS system that roots out suspicious tax returns may flag a return that has deductions that are too high for the reported income level. Additionally, mixing business and personal expenses can be a red flag for the IRS. Some small business tax deductions that could pose a problem if disproportionate to your income are expenses for vehicles, home office, meals, and entertainment, among others.
  3. High-income earner – if you are in a higher income bracket, your chances of being audited increase. While the overall audit rate for 2018 was 0.6%, the chances of being audited was much higher for high-income earners. Taxpayers reporting income from $500,000 to $1,000,000 were almost twice as likely to be audited at 1.1%. That rate went up to 2.2% for taxpayers making from $1,000,000 to $5,000,000. Those earning $5,000,000 to $10,000,000 saw an audit rate of 4.2%, while those making above that threshold saw the highest rate of 6.7%.
  4. Claiming a dependent – Only one parent is allowed to claim a child on their taxes, even if the parents are filing their taxes separately. The IRS may send an audit letter to determine which taxpayer is entitled to claim the child as a dependent. A child can be claimed as a dependent if the child is under the age of 19 or is a full-time student under the age of 24 and lives with you for more than six months of the calendar year.
  5. Foreign accounts and income – Failing to report a foreign financial asset like a bank account, brokerage, or mutual fund may also bring the IRS knocking. If you hold foreign assets worth over $50,000 for a single filer and $100,000 for joint filers, you must fill out Form 8938, identifying the institution where the assets are held and the highest value of those assets in the last year. Additionally, if you take the Foreign Earned Income Exclusion break, the IRS may carefully review your return for any discrepancies. U.S. citizens who are bona fide residents of a foreign country can exclude up to $107,600 of their 2020 income if they were in that country for at least 330 full days during any period of 12 consecutive months.

Cultural Venues’ Quest for Billions in Federal Aid Is Halted by Glitch

The Small Business Administration launched with great fanfare a long awaited portal for that would allow arts venues closed down by pandemic to apply for grant money to cover rent, utilities, insurance and other accumulated expenses. Unfortunately, the site was shut down due to technical difficulties on its first day of launching.

In a statement, the SBA explained that the agency “temporarily suspended the portal and will re-open it as soon as possible to ensure all applicants have fair and equal access.” The SBA said it would share advance notice of the time and date before the reopening so that all applicants can be prepared and have equitable access to the program, which will award grants on a first-come, first-serve basis within different areas of priority.

After opening the application window Thursday, the agency made it clear in a news release issued late Wednesday night that the grants won’t start going out until later this month.“The SBA is accepting SVOG applications on a first-in, first-out basis and allocating applicants to respective priority periods as it receives applications,” the release said. “The first 14 days of SVOG awards, which are expected to begin in late April, will be dedicated to entities that suffered a 90% or greater revenue loss between April and December 2020 due to the COVID-19 pandemic. The second 14 days (days 15–28) will include entities that suffered a 70% or greater revenue loss between April and December 2020. Following those periods, SVOG awards will include entities that suffered a 25% or greater revenue loss between one quarter of 2019 and the corresponding quarter of 2020.”

The technology issues weren’t the only concern. The Office of Inspector General (OIG) for the SBA expressed “serious concerns” with the control environment and tracking of performance results with the SVOG program, which is designed to provide eligible applicants with grants equal to 45% of their gross earned revenue, up to a maximum of $10 million. The report criticizes the audit plan established by the SBA’s Office of Disaster Assistance (ODA).

The ODA’s plan allows for a total of no more than 10 audits across all of the low-risk loans but this limitation is problematic because program officials estimate that the majority of SVOG grants will be characterized as low-risk, meaning that most grants will “be disbursed in sweeping lump sum payments with minimal requirements and expectations for post-award accountability,” the report said.

Noting that the ODA estimates the SBA will receive 15,000 applications and that the average SVOG size will be $1 million, the inspector general said that the low level of auditing and spending reviews for low-risk grants means that “the bulk of grant funds will not be subject to a reasonable degree of scrutiny.”

The Shuttered Venue Operators Grant program (SVOG) is a $16 billion grant program that was set up to help qualifying live music venues, independent theaters, museums and other live-event spaces hit hard by pandemic-prompted shutdowns. It was passed with a bipartisan effort as a part of the coronavirus relief package signed into law by President Trump in December. But it’s taken a long time to arrive: the agency has said that it’s a first-of-a-kind program for them, and they had to build it from the ground up.

Looking Ahead to 2021: Hope is Not Canceled

Despite the fresh start that a new year promises, our world hasn’t changed much since last March. We’re still living in a new normal. We’re masking up, working (and schooling) from home, and social distancing. Furthermore, scores of community events and activities have been canceled. However, there is something that’s never been canceled: it’s called hope. Here are a few things to embrace that can lift your spirits and help you navigate all the uncertainty.

Be Happy: The COVID-19 Vaccine is Here

This is incredible news. To date, there are two vaccines: Pfizer-BioNTech and Moderna. Those who receive the Pfizer-BioNTech shot will be given two injections, 21 days apart. Those who receive the Moderna shot also will be given two injections, one month (28 days) apart. Both are given in the muscle of the upper arm and can cause mild side effects. However, clinical trials for both have shown a high level of efficacy. The vaccine will be rolled out in phases. Healthcare personnel and residents of long-term care facilities will be offered the first doses. The fact that we even have a vaccine available might well be the very definition of hope.

Feel Refreshed: Take a News Break

Since most of us are isolated to some degree, it’s only natural to turn to our devices. Games and social media both have the potential to take your mind off of the pain in our world. However, if you tend to veer toward newsfeeds that feature nothing but bad news (which can be addicting), perhaps it’s time to take a break. According to Verywell.com, a constant stream of sensational or disaster reporting, whether you are exposed actively or passively, can elevate stress levels and trigger symptoms like anxiety and sleep troubles, robbing you of your well-being. So, unplug. Step away from your laptop. Give your phone to a family member, partner, or friend. Get outside and soak in some vitamin D. Re-claim that part of yourself that sees the glass half full.

Ditch the Guilt: Plan Your Cheat Meals

If you’ve been looking to food for some much-needed comfort over the past year, you’re not alone. Being at home just a few feet away from a fully stocked kitchen is tempting every minute! Perhaps some of you have banished any guilt about indulging, but for those who just can’t seem to shake it, choose your moments to indulge. Satisfy your cravings a few times a week or just on the weekends. The less you do this, the more you’ll enjoy it. And when you want to splurge, why not support a local restaurant by ordering takeout? You’ll feel better in no time.

Chill Out: Spend Time Doing Nothing

With everything that’s going on and all the responsibilities of living life and crossing things off our lists, stopping to do nothing might seem counter-intuitive; but often, it’s the best remedy for eliminating stress and restoring your sanity. Carving out time to sit with the feelings you’re experiencing – whether that’s irritation, anxiety, or sadness – can help dissipate them. Take some advice from Winnie the Pooh who said, “Doing nothing often leads to the very best of something.” When you give yourself permission to let go and empty your mind, you’ll be rejuvenated and ready to begin again.

Even though the happenings of 2020 were unprecedented, the truth is you do have a new year ahead. One that can be anything you want it to be. Just grab hold of something that has always been there and will never be canceled: hope.

Sources

https://www.cdc.gov/coronavirus/2019-ncov/vaccines/different-vaccines.html

https://stephanieyounger.com/blog/love-hope-kindness-and-community-have-not-been-canceled

https://www.verywellmind.com/is-watching-the-news-bad-for-mental-health-4802320#:~:text=A%20constant%20stream%20of%20sensational,like%20anxiety%20and%20trouble%20sleeping.

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