Tax Relief with Timalyn Bowens
Episode 62: In this episode, Timalyn explains why the IRS selects certain taxpayers for audits and reassures listeners that being chosen does not automatically mean anything is wrong. Following up on last week’s episode, , Timalyn continues her audit series by breaking down how audit selections are made and why it is important not to panic if you receive an IRS notice. Contrary to common fears, receiving an audit notice does not mean jail time or that you did something wrong. Many audits are selected at random or flagged through a computer system that looks for unusual patterns or...
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Episode 61: In this episode, Timalyn breaks down one of the most misunderstood topics in tax: the IRS audit. After 60+ episodes of educating taxpayers, she’s kicking off a brand-new series that explores what an audit really means — and what it doesn’t. Many people fear a suit-wearing IRS agent knocking at their door, but as Timalyn explains, that’s highly unlikely. Instead, most audits today are conducted through correspondence and notices, not surprise visits. So, what is an audit? An IRS audit is simply a review or examination of your accounts and financial information to ensure you...
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Episode 60: In this episode, Timalyn explains your right to appeal unfair IRS decisions and why you shouldn't give up. We are celebrating three years and 60 episodes of the Tax Relief with Timalyn Bowens podcast! Provisions from the 2017 Tax Cuts and Jobs Act are set to expire in December, and many taxpayers are worried about IRS mistakes - especially after recent budget cuts and workforce reductions. Does this mean you have to accept wrongful IRS decisions? Timalyn says absolutely not. She explains that the IRS has an Independent Office of Appeals that provides fair, impartial review of...
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Episode 59: In this episode, Timalyn addresses whether or not the IRS is here to stay. We have seen significant changes at the IRS within the past few months as they went through a work force reduction. We have also seen them lose $40 billion of the $80 billion that was promised to them in funding by the Biden Administration. Does this mean that they are going to go bye bye? Timalyn doesn't believe so. She believes that this smaller force will make it more difficult for taxpayers to handle their IRS issues on their own. She also fears that some taxpayers will receive unfair treatment, as well...
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Episode 58: In this episode, Timalyn explains how much time you have to pay your tax bill and how much time the IRS legally has to collect. Your tax balance is due on the due date of the return. However, when the IRS sends you a will give you 30 days to pay before the IRS uses any enforcement. This includes things like an or . If you can pay the debt off within 180 days you may qualify for a short-term installment agreement. This agreement can be arranged using your online IRS.gov account to set up an online payment agreement (OPA). If the amount is over $50,000 you will have to...
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Episode 57: In this episode, Timalyn explains the reason you likely owe taxes this year. She highlights 5 common reasons that people owe each year. It is ultimately the responsibility of the taxpayer to ensure that they are withholding enough taxes. The top 2 reasons that people owe the IRS is because their withholding and/or estimated tax payments are off. Timalyn has created a series on her YouTube channel to walk you through the process of correcting your withholding for a W-2 job, pension, or your social security. You can find this series below. If you are self-employed or...
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Episode 56: In this episode, Timalyn explains that all hope is not lost if you can't pay your taxes in full. You do have options! First, take a deep breath! Make sure that you have your tax return filed on time. This will help you avoid any additional penalties, such as the . Payment Arrangments You may qualify to pay your balance over time. If you owe less than $50,000 and have been tax compliant you may qualify to set up an OPA yourself using the IRS website. An OPA is an . If the balance is $10,000 or less and you haven't owed in the past 3 years or defaulted on an...
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Episode 55: In this episode, Timalyn explains what the failure to file penalty is and why it is adding so much to your tax bill. She will not only talk about what it is but how it's calculated, and how to potentially get it removed. Can't File Your Taxes On Time? You can avoid the failure-to-file penalty by filing a timely tax return or tax extension. If you're an individual needing to file an extension you can do so by filing Form 4868. Timalyn will have a video to walk you through filing the 2024 4868 on her YouTube channel, coming out on March 31st. The Failure to File...
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In Episode 54 Timalyn discusses unemployment tax and how it affects a taxpayer's tax liability. Some forms of unemployment are not taxable such as workers compensation. The topics covered in this episode are: What is unemployment? Is unemployment taxable? What's workers compensation? How is unemployment reported? What is Form 1099-G? If you'd like to work with Timalyn directly, you can book a call with her at www.Bowenstaxsolutions.com . As we conclude Episode 54, we’d like to encourage you to connect with Timalyn on social media. You’ll be able to...
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In this episode, Timalyn discusses severance pay and the tax implications of receiving a severance package. She breaks it into 3 sections: What is severance pay? Is severance pay taxable? Why is my severance pay taxed at a higher rate? How to lower the taxes on your severance pay. If you are already facing a tax debt that you can't pay in full Timayn mentions episode 18 - as a resource for you to use to stop the IRS from using enforcement such as tax levies to collect from you. If you'd like to work with Timalyn directly you can book a call with her at . As we conclude...
info_outlineEpisode 44: In this episode, Timalyn discusses issues related to tax audits. The fear people have about being audited is often paralyzing. It’s a serious issue and you need to be prepared to both avoid it and to know what you need to do if it happens. There are steps you can take to ensure your business is audit-ready.
There’s No Such Thing as an Audit-Proof Return
Regardless of what some tax professionals might claim, there’s no way to guarantee you won’t be audited. There are different types of audits and the selection “triggers” vary. The IRS has the Discrimination Function System that produces a DIF score. This system rates the potential for change based on past IRS’ experiences with similar returns.
The IRS can track returns for similar businesses, using categories such as NAICS codes. This code describes your type of industry. When they look at a collection of similar returns from the same industry, they can determine averages for specific data points, such as expenses, credits, etc. for your reported income level. If your DIF score is out of that range, it could trigger an audit.
Irregularities can also raise flags. For instance, if all of your figures on your tax return are round numbers, that would seem odd and could result in an audit.
The IRS has a whistleblower program. They pay snitches who were correct about something they alerted the IRS to regarding someone else’s tax filings.
It Doesn’t Mean You Did Anything Wrong
Timalyn emphasizes that just because you’re being audited, it doesn’t mean you did anything wrong. She explains that for 2023, there was a 0.4% chance that taxpayers would face an audit. Lower income individuals actually had a slightly higher chance.
Don’t Fear the Boogey Man
An audit isn’t as scary as it sounds. It’s a review or exam of your tax account and your financial information to ensure proper reporting. If you keep good records and don’t inflate/deflate your income or expenses, is there really anything to fear? You have the information and it’s accurate. As long as you can prove that information was reported correctly to the IRS, you should be fine.
If your records are extremely unorganized, you had to guess at certain dollar amounts or someone else guessed for you, the audit may become a problem for you.
Correspondence Audits
This is where the IRS will contact a taxpayer to request specific information. If you’ve received an audit notice, or a field audit where the IRS agent comes to you, Timalyn recommends you don’t handle this on your own. It doesn’t matter how good your records are.
Yes, you may be able figure out how to handle the process, but you’re going to be at a disadvantage and the opportunity to make a mistake is significant. This is not something you should simply search for on YouTube. You need an experienced tax professional who knows how to deal with the IRS and the rights you have, during the audit process.
If you’ve received an audit notice, you can book a tax relief consultation with Timalyn. She also has an episode on what you need to look for when hiring a tax professional. Episode 23 is titled, “Which Type of Tax Professional Do I Need?” In the show notes for that episode, there’s a link to Episode 16, “How to Choose a Tax Professional.” Both are full of valuable information for your consideration.
When you receive a Correspondence Audit, the IRS may not explain specifically why they are requesting the information. It can be a significant source of anxiety. Make sure you respond to the IRS in a timely manner. Timalyn suggests responding before the deadline, in case something else needs to be addressed. If you have good records, this will be much easier.
Do You Already Have a Tax Power of Attorney?
If you already have a tax power of attorney, you’ve already authorized this person to speak to the IRS on your behalf. They’ve filed submitted IRS Form 2848, so they will also receive the correspondence from the IRS.
Don’t assume the person who prepared your tax return is receiving the same correspondence you have received from the IRS. Unless they’ve submitted Form 2848, the IRS does not have the authorization to speak with that tax preparer and vice versa.
Prepare Your Business for an Audit
This is the best thing you can do, especially because of the random nature of IRS audits. Timalyn re-emphasizes the importance of good record keeping. You have to be able to substantiate everything you entered on your tax return. This applies to both income, expenses and credits.
There are many ways people have committed fraud by overstating their income when applying for the PPP loans, SBA loans, or a mortgage. These are reasons the IRS may require you to substantiate your income. Good financial statements, based on accurate bookkeeping can help you to prove you received the income you claim, even if you don’t have a 1099 to back it up. Your bookkeeper or accountant will reconcile your bank account. The financial reports should reflect your income. Make sure the person who prepares your financial statements has access to your bank statements. If they are doing it without access, you may be setting yourself up for a significant issue or issues.
The same record keeping applies for your expenses. It’s why business owners should not co-mingle their business and personal funds. During an audit, explaining the different purchases will be more complicated if you can’t determine whether they were for business or personal reasons.
You Need a Bookkeeper
This person is a valuable resource. It’s something Timalyn often recommends you outsource. A business owner can waste a lot of time trying to do their own bookkeeping. You should definitely understand your financial records, but the time spent doing all of the record keeping and reporting could be better spent generating more revenue.
The 3-H’s of Record Keeping
Timalyn suggests there are questions to consider related to record keeping.
● How long should you keep your records?
● How should your store your records?
● How do you deliver your records?
Episode 20 specifically deals with how long you need to retain your tax records.
Don’t Create More Problems for Yourself
If you’re being audited, remember to only provide the IRS what they are asking for. Make sure the support for those records is readily available. Timalyn uses the example of someone who was asked to show income for a number of years. However, because they didn’t have good records, they instead decided to turn over all bank statements to the auditor. This resulted in the auditor finding even more questionable transactions that were flagged.
If you’re going through an audit, you typically wouldn’t know how to handle the IRS. Even good intentions can lead to many more problems. That’s why you should work with a tax representation professional who is familiar with the process and can best represent you. Check out Episode 33, “What Is Tax Representation?” Just because someone prepared your taxes doesn’t mean they’re equipped to represent you.
As 2023 comes to a close and tax season looms, you need to ask yourself if your business is audit-ready? Do you have good financial records? How are we handling the 3-H’s of record keeping? Is our tax preparation professional asking questions about our records? It’s time to get ready.
One step you can take is to book a tax relief consultation with Timalyn.
If you are a tax professional who would like to help taxpayers with their audits, Timalyn strongly suggests joining her Tax Pro Representation Journey community.
Please consider sharing this episode with your friends and family. There are many people dealing with tax issues, and you may not know about it. This information might be helpful to someone who really needs it. After all, back taxes shouldn’t ruin their life either.
As we conclude Episode 44, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.
Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time. Thanks for listening to today’s episode.
For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .
If you have any feedback, or suggestions for an upcoming episode topic, please submit them here: https://www.americasfavoriteea.com/contact.
Disclaimer: This podcast is for informational and educational purposes only. It provides a framework and possible solutions for solving your tax problems, but it is not legally binding. Please consult your tax professional regarding your specific tax situation.