The 2025 tax law (the “One, Big, Beautiful Bill” or OBBBA) introduced sweeping changes to deductions, credits, and business expensing. While many taxpayers legitimately benefit from larger deductions and updated thresholds, the new rules also create fresh IRS audit risks. Aggressive claims, mismatches between federal and state treatment, and reporting changes (especially for marketplace and gig income) are among the top red flags the IRS will be watching in the coming tax filing season 2026.

This guide explains the most important IRS audit red flags after the 2025 tax law and practical, step‑by‑step safeguards for taxpayers to avoid problems.

WHY 2025 CHANGES INCREASE AUDIT RISKS?

The IRS uses document matching, algorithms, and targeted industry programs to select returns for examination. Two broad reasons the 2025 law increases audit touchpoints:

1. More complexity and new elections. Permanent 100% bonus depreciation, restored R&D expensing, and new reporting thresholds create additional tax elections that must be properly documented. Errors or overly aggressive positions increase IRS audit risk.
2. Data matching and reporting shifts. Restored 1099-K thresholds and updated IRS reporting increase the risk of mismatches between third-party data and tax returns, a common trigger for IRS audits.

TOP IRS AUDIT RED FLAGS (AND HOW TO AVOID THEM) IN TAX SEASON 2026

1. Poorly documented Section 179/Bonus Depreciation claims: Full bonus depreciation (and higher Section 179 limits) can sharply reduce taxable income in year one. States that decouple may require add‑backs, and the IRS will want proof that the property qualifies and the basis is correct. Aggressive classification (personal vs. business use, listed property) draws attention.

How to avoid:

• Keep asset-level purchase invoices, delivery/installation records, and capitalization policies. 
• Document business purpose and placed‑in‑service dates. 
• If you operate in a state that decouples from bonus depreciation, model the required state addbacks and clearly document them in the tax workpapers.

2. Schedule C (sole proprietor) returns with repeated losses or excessive expenses: Schedule C filings historically attract IRS audits. Repeated losses year after year or unusually large deductions (meals, travel, contractor labor, home office) can trigger a closer look for hobby‑loss rules or misstated business activity.

How to avoid: 

• Maintain a profit plan, time logs, sales records, and marketing documentation showing a profit motive. 
• Keep receipts and contemporaneous logs for meals, mileage, and home office expenses. The IRS expects reliable records. See “Audits & Records Requests” for exactly what auditors ask for.

3. Mismatches on third‑party reporting (1099‑K, 1099‑NEC, W‑2s): The IRS cross‑checks Forms W‑2/1099 against filed returns. If the gross receipts you report differ materially from what payers sent, the return becomes a prime candidate for examination. The 2025 Fact Sheet on Form 1099‑K clarifies reporting rules — but taxpayers still commonly underreport gross receipts or omit deductible offsets.

How to avoid: Reconcile all 1099s to bank statements and accounting records before filing. Do not assume missing 1099s mean income is non-taxable; the IRS treats all income as taxable unless excluded by law. File an amended return promptly if errors are identified.

4. Aggressive or unsupported R&D credit claims / large credits with weak substantiation: R&D credits remain attractive but complex. Large or recurring claims without solid project documentation, time studies, and cost support can trigger audits, especially after the 2025 changes to R&D expensing rules.

How to avoid: 

• Use project files, payroll records, invoices, lab notebooks, and technical summaries. If you claim credit, prepare a concise technical memo showing qualified activities and the costs allocated. Consider a pre‑filing R&D documentation review.

5. High charitable deductions, noncash gifts, or appraisal issues: Large charitable deductions, especially for noncash property requiring Form 8283 or appraisals, draw automated screening. The IRS looks for valuation inconsistencies.

How to avoid: Keep donation receipts, contemporaneous records, and qualified appraisals when required. If you claim a deduction for a vehicle or large property donation, follow Form 8283 and appraisal rules meticulously.

6. Misuse of credits aimed at individuals (EITC, Child Tax Credit, adoption credit): Refundable credits attract scrutiny because they increase refund exposure. Incomplete eligibility (residency, support tests, AGI thresholds) can prompt automated checks and audits. The IRS recently adjusted many thresholds and credit amounts — know the updated rules.

How to avoid: Keep documents proving eligibility (birth certificates, custody agreements, school records, proof of residency). When in doubt, consult guidance on the specific credit and error on the side of conservative claims.

7. Large or unusual business interest expense or international tax positions: Changes to interest expense limits, GILTI/NCTI rules, and international tax provisions require careful calculation. Complex positions without proper transfer pricing support or documentation increase IRS audit risk.

How to avoid: Maintain transfer pricing studies, contemplate documentation, and a qualified international tax memo. Run sensitivity analyses for different audit outcomes.

WHY WORKING WITH A TAX PROFESSIONAL MATTERS NOW?

The 2025 tax law made many valuable benefits available — but with added complexity that raises IRS audit risk if records are weak or taxpayers are careless.

Tax professionals provide:

• proactive tax planning around bonus depreciation and Section 179 elections.
• R&D documentation and credit substantiation. 
• federal vs. state conformity modeling to avoid surprise state tax bills.
• audit defense and representation if needed.

IRS Audit Group can help you review returns before filing, prepare organized work papers, and represent you during any IRS contact. For operational clients, we also provide staff training on audit‑ready recordkeeping.

IRS AUDIT GROUP

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles, California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices nationwide.  Please get in touch with us for more information.

Telephone Number: (310) 498-7508

info@irs-audit-group.com

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KEY OFFICIAL RESOURCES

• IRS — One, Big, Beautiful Bill provisions. https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions.  (See IRS fact sheets and summaries for details.)
• IRS — Form 1099‑K FAQs (Fact Sheet 2025‑08) and Form 1099‑K guidance. https://www.irs.gov/newsroom/irs-issues-faqs-on-form-1099-k-threshold-under-the-one-big-beautiful-bill-dollar-limit-reverts-to-20000.
• Treasury/IRS guidance — additional first‑year depreciation (bonus depreciation) under the 2025 law. https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill.
• IRS — Audits & Records Requests (what auditors will ask for). https://www.irs.gov/businesses/small-businesses-self-employed/audits-records-request.
• Tax Foundation — state decoupling and conformity issues after OBBBA. https://taxfoundation.org/research/all/state/big-beautiful-bill-state-tax-impact/. 

The 2025 federal tax changes (commonly called the “One, Big, Beautiful Bill” or OBBBA) brought sweeping modifications to deductions, credits, and business expensing. While these changes were enacted at the federal level, states decide independently whether — and how — to “conform” to federal tax law. That means some states adopted certain provisions, some selectively adopted them, and others explicitly decoupled to protect state revenues.

This guide is a state conformity tracker: it explains how conformity works, summarizes which states have adopted or rejected major 2025 federal changes (with links to official guidance), and offers practical advice for taxpayers and businesses.

WHY STATE CONFORMITY MATTERS?

When a state “conforms” to the Internal Revenue Code (IRC), it typically uses federal definitions (often based on a specific date) to compute state taxable income. But states can:

• Adopt the IRC as of a certain date (rolling or fixed conformity), or
• Pick-and-choose (selective conformity), or
• Decouple (reject certain federal provisions and require add-backs).

Because the Tax Year 2025 law reintroduced large federal incentives — especially 100% bonus depreciation (168), restored immediate R&D expense (Section 174 changes), and worker-focused deductions (tips/overtime) states faced potentially large revenue losses. Many reacted by decoupling from some or all of those provisions. The National Conference of State Legislatures (NCSL) provides an ongoing summary of state conformity actions that can be viewed here: https://www.ncsl.org/fiscal/2025-tax-conformity-changes

MAJOR NATIONAL TRENDS (WHAT MOST STATES ARE DOING)

• Bonus depreciation & R&D expense: Many states have long chosen not to follow federal bonus depreciation rules. Some states fully disallow bonus depreciation. Others allow it only after taxpayers add it back and deduct it over time. For Tax Season 2026, those states largely kept the same position. They did not adopt the restored and expanded federal bonus depreciation. They continued to require add-backs instead. The same pattern applied to federal R&D expensing changes. Several states required taxpayers to add back R&D expenses rather than deduct them immediately. See the Tax Foundation’s state-by-state analysis to understand which state adopts or decouple. https://taxfoundation.org/wp-content/uploads/2025/07/OBBBA-State-Conformity-Handout.pdf

State	Tax Year 2025 Conformity	What Changed / Key Impact	Authoritative Reference
California	Selective conformity	Advanced IRC date to Jan. 1, 2025, but excluded major OBBBA provisions. Many federal incentives do not flow through automatically.	California Franchise Tax Board – Schedule CA Instructions
New York	Add-backs required	Continues separate depreciation calculations and requires adjustments for accelerated depreciation.	NY Form IT-399 & Instructions
Illinois	Legislative decoupling	Enacted statutory decoupling from federal bonus depreciation and related provisions.	Illinois FY-2025 Legislative Summary
Michigan	Add-backs via forms	Updated individual and corporate forms to adjust for decoupled bonus depreciation and other federal changes.	Michigan TY2025 Forms & Guidance
Delaware	Partial conformity	Picks up the federal SALT cap increase but does not adopt certain worker-focused deductions (tips/overtime).	Delaware Division of Revenue Notices
Rhode Island	Targeted decoupling	Limits bonus depreciation and/or R&D expensing; add-backs required.	Link at the end of the table
Maryland	Targeted decoupling	Does not fully adopt federal bonus depreciation or immediate R&D expensing.	Link at the end of the table
New Jersey	Targeted decoupling	Maintains separate depreciation and expense timing rules.	Link at the end of the table
Connecticut	Targeted decoupling	Requires add-backs for certain federal incentives.	Link at the end of the table
Massachusetts	Targeted decoupling	Selective conformity limits accelerated depreciation benefits.	Link at the end of the table
Minnesota	Targeted decoupling	Uses fixed conformity date; requires adjustments for newer federal provisions.	Link at the end of the table
Pennsylvania	Targeted decoupling	Does not follow federal bonus depreciation; state adjustments required.	Link at the end of the table
District of Columbia	Explicit decoupling	Rejected certain OBBBA worker benefits, including no-tax tips and overtime; revenue redirected to local programs.	D.C. Office of Tax and Revenue

• SALT (State and local tax deduction): A handful of states adjusted administrative guidance to reflect the federal SALT cap increase for 2025, but state-level treatment varies greatly. The following link provides information on state-by-state OBBBA conformity. https://taxfoundation.org/research/all/state/big-beautiful-bill-state-tax-impact

• Worker deductions (tips/overtime): A few jurisdictions (notably the District of Columbia) explicitly rejected or limited the federal “no tax on tips” / “no tax on overtime” provisions to preserve revenue or to fund alternate state programs.

STATE-BY-STATE SNAPSHOT

Below are states that took prominent actions to decouple, modify, or otherwise respond to 2025 federal changes. For each state, we include the authoritative link you can direct clients to.

Aggregated for remaining State: https://taxfoundation.org/research/all/state/big-beautiful-bill-state-tax-impact

HOW THIS AFFECTS TAXPAYERS — PRACTICAL EXAMPLES

• Small business buys a $200,000 piece of equipment in 2025. Federally, 100% bonus depreciation may allow a full expense in 2025 — but if your state decoupled (e.g., California, Illinois), you’ll need to add back the bonus depreciation on the state return, increasing state taxable income. That may reduce the federal cash-tax benefit at the state level.
• Retiree benefitting from the temporary senior deduction (extra $6,000): Some states (including D.C.) chose not to pick up the senior bonus deduction — meaning the retiree may pay more state tax despite lower federal tax.
• Gig worker and 1099-K changes: The IRS reinstated the $20,000/200-transactions threshold for Form 1099‑K reporting under OBBBA, but some states used different thresholds or retained prior reporting rules — keep careful records and check both federal and state guidance. IRS FAQs: https://www.irs.gov/newsroom/irs-issues-faqs-on-form-1099-k-threshold-under-the-one-big-beautiful-bill-dollar-limit-reverts-to-20000.

State conformity timelines — what to watch for

States may update their tax code at any time — some will pass quick “decoupling” bills in reaction to revenue estimates; others will adopt gradual or rolling conformity. The NCSL and Tax Foundation maintain trackers and summaries that are updated frequently. https://www.ncsl.org/fiscal/2025-tax-conformity-changes.

Where to find authoritative, state-specific guidance (quick links)

• National Conference of State Legislatures — State conformity changes: https://www.ncsl.org/fiscal/2025-tax-conformity-changes.
• Tax Foundation — OBBBA state tax impact: https://taxfoundation.org/research/all/state/big-beautiful-bill-state-tax-impact/.
• California FTB — Schedule CA instructions & conformity notes: https://www.ftb.ca.gov/forms/2025/2025-540-ca-instructions.html.
• Delaware Division of Revenue — tax season updates: https://revenue.delaware.gov/tax-season-updates/.
• Illinois FY-2025 Legislative Summary (decoupling): https://www.tax.illinois.gov/content/dam/soi/en/web/tax/research/legalinformation/documents/fy-2025-legislative-summary.pdf.
• IRS — One, Big, Beautiful Bill resources: https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions.

IRS AUDIT GROUP

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles, California, and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices nationwide.  Please get in touch with us for more information.

Telephone Number: (310) 498-7508

info@irs-audit-group.com

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The 2025 U.S. tax year, a.k.a. Tax Season 2026, brings significant and wide-ranging changes that affect individuals, businesses, and multi-state taxpayers. This guide compiles the most important federal updates, highlights areas where states may differ, and provides direct links to IRS forms and authoritative guidance so taxpayers can find answers quickly.

Overview — the new federal baseline
Congress enacted a major tax package in 2025 that adjusted many 2017 Tax Cuts and Jobs Act (TCJA) era rules and added new taxpayer-focused benefits. The IRS has published summaries and fact sheets describing these changes in their official website. Please click the link: https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions

We have compiled and simplified the important key changes and benefits that all taxpayers need to know.

Individual Taxpayer Highlights
Standard deduction increases (tax year 2025, filed 2026):

• Single / Married Filing Separately: $15,750 
• Head of Household: $23,625 
• Married Filing Jointly: $31,500

These amounts were increased for inflation and adjusted in law. Higher standard deductions mean more taxpayers will find the standard deduction is advantageous compared to itemizing. Official IRS inflation-adjustment guidance for exact brackets and thresholds is here: https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill

Additional Senior Deduction (Temporary Benefit)
For tax years 2025–2028, taxpayers aged 65+ may receive a bonus deduction (an additional $6,000 on top of the usual age/blind additional standard deduction). This raises the effective standard deduction for many seniors and retirees.

Child and Family Credits
The Child Tax Credit (and related family credits) received modest increases and continues to have income-based phaseouts. The Child Tax Credit is worth up to $2,200 per qualifying child. If taxpayers have little or no federal income tax liability, they may qualify for the Additional Child Tax Credit (ACTC), up to $1,700 per qualifying child, depending on the income. Taxpayers must have earned income of at least $2,500 to be eligible for the ACTC.

Taxpayers qualify for the full amount of the Child Tax Credit for each qualifying child if they meet all eligibility factors and the annual income is not more than $200,000 ($400,000 if filing a joint return). Parents and guardians with higher incomes may be eligible to claim a partial credit.

For complete eligibility rules, see: IRS — Child Tax Credit: https://www.irs.gov/credits-deductions/individuals/child-tax-credit

Worker-Focused Provisions
The 2025 law introduced targeted exclusions and deductions for certain types of earned pay, including capped exclusions for qualifying tip income and for some overtime wages. These provisions are limited by income phaseouts and by other eligibility tests. Visit the IRS— Worker deductions & provisions fact sheets for detailed rules: https://www.irs.gov/newsroom/one-big-beautiful-bill-act-tax-deductions-for-working-americans-and-seniors

Gig Economy Reporting (1099-K, 1099-NEC)

1099-K threshold: The new law restored the higher reporting threshold for third-party settlement organizations — generally the $20,000 and 200 transactions rule in applicable periods. See the IRS FAQ on Form 1099-K: https://www.irs.gov/newsroom/irs-issues-faqs-on-form-1099-k-threshold-under-the-one-big-beautiful-bill-dollar-limit-reverts-to-20000

1099-NEC & 1099-MISC: The contractor reporting landscape changed in the legislation. Filers and payers must review IRS instructions for current thresholds and filing rules. IRS — About Form 1099-NEC:https://www.irs.gov/forms-pubs/about-form-1099-nec

Important reminder: Even if the gig economy workers do not receive a 1099, all taxable income must be reported on your return.

Business & Pass-Through Entity

100% bonus depreciation: The legislation made bonus depreciation more favorable in tax season 2026, allowing many qualifying business assets placed in service to be expensed immediately rather than depreciated over many years. This change enhances cash-tax planning for businesses that purchase equipment, machinery, and qualifying property.

R&D expensing: Domestic research costs became more favorably treated, allowing many businesses to deduct qualifying R&D expenses in the year incurred. This is especially important for tech, manufacturing, and life sciences companies.

International tax changes (GILTI / NCTI): The international provisions were revised, including changes to the treatment of Global Intangible Low-Taxed Income (GILTI), sometimes referred to in guidance by new names (e.g., Net CFC Tested Income). Multinational corporations should work closely with international tax advisors to model the changes.

Opportunity zones: The law adjusted the rules around Opportunity Zone investments and made certain provisions permanent, encouraging long-term capital deployment into designated communities.

Key Dates: https://www.irs.gov/individual-tax-filing

• Federal filing deadline (tax year 2025 returns): April 15, 2026
• Typical extension filing deadline (if extension approved): October 15, 2026

Primary IRS forms and pages (clickable links):

• Form 1040 (individual return PDF):https://www.irs.gov/pub/irs-pdf/f1040.pdf    
• Form 1040 Instructions: https://www.irs.gov/pub/irs-pdf/i1040gi.pdf   
• Form 1099-K (about): https://www.irs.gov/forms-pubs/about-form-1099-k  
• Form 1099-NEC (pdf): https://www.irs.gov/pub/irs-pdf/f1099nec.pdf

Other helpful IRS pages:

• IRS overview — One, Big, Beautiful Bill: https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions   
• IRS FAQ on 1099-K threshold: https://www.irs.gov/newsroom/irs-issues-faqs-on-form-1099-k-threshold-under-the-one-big-beautiful-bill-dollar-limit-reverts-to-20000

IRS AUDIT GROUP

IRS Audit Group consists of tax professionals, CPAs, enrolled agents, and tax attorneys.  We are located in Los Angeles, California and our primary area of expertise is IRS Tax Audit Representation.  However, our certified professionals cooperate and work with all IRS offices nationwide.  Please get in touch with us for more information.

Telephone Number: (310) 498-7508

info@irs-audit-group.com

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The deadline for Tax Season 2023 for individuals is over, and those who filed for refunds will be receiving the same within 21 days from the filing date.  But, If the taxpayers have received a notice from the IRS that their taxes are incorrect or that they owe money, they can either pay or dispute if IRS is wrong. There are options available to resolve such disputes. The IRS dispute process is an essential part of the tax system, but it can be complicated and intimidating. Managing a dispute with IRS can be a complex and compelling process for taxpayers. Following are the steps to manage a dispute with the IRS. The first step in managing an IRS dispute is understanding how the process works, and what options are available for appealing or litigating the issue at hand.

Understanding the IRS Dispute Process

The IRS dispute procedure consists of numerous steps. Taxpayers can file a dispute if they disagree with the amount of tax they are required to pay or believe the IRS made a mistake in their tax return. If there are any changes that would affect their refund or balance payable, the first step is to file Form 1040X. Taxpayers can submit Form 9465, Form 8857, or Form 843 with the required supporting paperwork if there are no changes. These forms include Instalments Agreement Request, Request for Innocent Spouse Relief, and Claim for Refund and Request for Abatement, respectively. Ensure that taxpayers submit all required forms and documents to initiate the dispute process.

If there is no communication from the IRS regarding the dispute after 90 days from the filing, it is time to move forward with appealing their decision. To do so, follow these steps:

Appealing IRS decision

Taxpayers have the right to appeal an IRS decision, and taxpayers have the right to use the two-step appeals process which involves an administrative appeal. Taxpayers need to submit a written request for reconsideration to the office that made the initial decision within 60 days of receiving a letter of disallowance. This can be done by letter, fax, or online at www.irs.gov/appeals. Taxpayers can request Form 12356-A, which offers guidance on how to complete and submit the appeals with necessary supporting evidence. This phase of the investigation aims to identify why the IRS took certain actions, such as reducing refunds.

Litigating IRS Dispute

Taxpayers need to take legal action if they are unable to resolve their dispute with the IRS. The IRS offers several options for litigating disputes that include.

• Filing a lawsuit against the IRS in court. If a taxpayer has a valid reason for disputing an assessment or collection activity, they can file suit against the IRS in federal court or state court if applicable. Throughout this process, they need a tax attorney who specializes in tax law to represent them.
• Requesting a management hearing with the Appeals Office Reviewer (AOR) is another option when appealing an IRS decision. AOR evaluation from the relevant evidence before determining whether to grant relief or not. This step does not guarantee relief, but it’s usually the first taken in appeals.

The IRS dispute process can be confusing, but it’s important to know taxpayers’ options. It is important to understand the steps included and the options available to taxpayers for resolving the issue. This may include communications with IRS and providing additional information to support their position, requesting an appeals conference with an independent appeals officer, or considering mediation. In some cases, litigation may be necessary. Therefore, seeking tax professional advice and guidance throughout the process can help ensure that taxpayer’s rights are protected and they’re able to achieve the best possible outcome. IRS Audit Group is a tax audit representation company that helps taxpayers navigate such time-consuming dispute processes. Contact us for a free consultation. https://irsauditgroup.com/contact/

Telephone Number: (310) 498-7508

info@irs-audit-group.com

There are times when Taxpayers choose to represent themselves in an IRS audit or hire a tax professional to handle the case on their behalf. Those who want to avoid paying legal fees or who feel they have a thorough understanding of tax law may find self-representation to be intriguing. However, it also comes with its own set of risks and potential downsides. Here are some of the pros and cons of self-representation during an IRS audit, and helps taxpayers make an informed decision about how best to handle their audit.

Pros of Self-Representation

Cost Savings: One of the biggest benefits of self-representation is savings on account of Auditor fees. Taxpayers who represent themselves are not required to pay for tax audit representation services. Particularly for individuals or small-business owners who are on a limited budget, this gives considerable savings.

Better Control: The taxpayer has more influence over the process when they act as their own representative. They are in charge of gathering and submitting the required paperwork and data. This enables them to ensure that everything is conducted appropriately and to comprehend every step of the procedure.

Knowledge Enhancement: Self-representation can also be an excellent opportunity to learn more about tax law and the audit process. To make sure they are presenting their case appropriately, the taxpayer will need to read and comprehend tax laws and processes. The knowledge and experience gained will be useful for conducting business thereafter.

Cons of Self-Representation

Lack of Expertise: The audit process can be intimidating for taxpayers who are not familiar with tax law because it is complicated. An established tax audit representation company has experts who have extensive knowledge of tax law with years of experience dealing with the IRS. They are better prepared to identify any deductions or credits that taxpayer misses, and they can ensure that their representation is accurate and complete.

Reduced Emotional Distress: An IRS audit can be stressful, and self-representation can amplify that stress. The IRS correspondence can be handled entirely on behalf of the taxpayer by a tax audit representation firm, lessening their emotional burden and enabling them to concentrate on other facets of their lives.

Timesaving: Self-representation consumes time, and taxpayers who are familiar with the audit procedure would end up with mistakes and omissions. The documentation and correspondence with the IRS can be overseen by a qualified tax audit representation firm, saving the taxpayers’ time and guaranteeing that everything is done correctly.

Reduced Risk of Penalties: If a taxpayer makes a mistake in representation, it could result in penalties or interest charges. A tax professional has the knowledge to guarantee correct and thorough taxpayer representation, lowering the possibility of fines and interest charges.

Self-representation during an IRS audit seems like a cost-worthwhile option, but it is important to consider the potential drawbacks. The lack of proficiency, emotional distress, and time-consuming nature of the process can ultimately lead to mistakes, which can result in fines and interest charges. Therefore, it is generally suitable to seek the services of a professional tax audit representation company. Their experts can provide the necessary knowledge and experience to navigate the audit process successfully and minimize the risk of penalties and interest charges.

If you are facing an IRS audit and require assistance, reach out to the IRS Audit Group based in Los Angeles. We specialize in tax audit representation and aim to guide taxpayers through the audit process while safeguarding their rights. Our team has Lawyers, CPA,s and Enrolled agents who can carefully examine your tax records and returns, communicate with the IRS on your behalf, represent you during the audit, and negotiate with the IRS to help you avoid the stressful ordeal. We ensure that clients achieve the best possible outcome from the audit process. You can contact us to schedule a free consultation. https://irsauditgroup.com/contact/

Telephone Number: (310) 498-7508

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Tax Season 2023’s due date for Tax-Exempt Organisations is May 15, 2023, to file returns. Numerous tax-exempt organizations have received reminders from the IRS on their forthcoming filing deadline of May 15, 2023. Tax-exempt organizations often need to submit certain reports by the 15th day of the fifth month after the end of their accounting period. However, if the 15th falls on a weekend or holiday, the due date is extended to the next business day.

What are Tax Exempt Organizations and Who Are Eligible?

Entities that are excused by IRS from paying federal income tax are known as Tax-exempt organizations. These organizations need to run solely for reasons of religion, charity, science, literature, education, or the prevention of cruelty to children or animals. Charitable organizations, churches and other religious institutions, educational institutions, hospitals, and social welfare organizations are examples of tax-exempt organizations. One can also find out whether an organization is tax-exempt using the IRS tool provided.

How to File the Returns for Tax Season 2023?

To make it easier to comply with reporting obligations, tax-exempt organizations are encouraged to file their returns electronically. Electronic filing provides a quick acknowledgment of the IRS receiving the return and reduces processing time. For the tax season 2023, organizations filing Form 990, 990-EZ, 990-PF, or 990-T must submit their returns electronically, and private foundations filing Form 4720 must also file the form electronically. Charities and other tax-exempt organizations can file these forms electronically using an IRS-authorized e-File Provider. Furthermore, organizations eligible to submit Form 990-N need to do so electronically and can use Form 990-N (e-Postcard) on the IRS website to file. By filing their tax returns electronically, tax-exempt organizations can comply with the reporting requirements quickly and efficiently.

Apply for an Extension of Time to File the Tax Returns for 2022

If a tax-exempt organization is unable to file its return by the due date, it can request an extension of time to file using Form 8868, Application for Extension of Time to File an Exempt Organization Return. This form must also be filed by the deadline of the tax season 2023, i.e., May 15, 2023. The extension provides an additional six months to file the tax return. However, the extension does not extend the time to pay any taxes owed, it only allows the organizations to file the returns at a later date. Organizations that cannot pay any taxes owed by the original due date may be subject to penalties and interest.

Avoid these Errors While Filing for the Tax Season 2023

Tax-exempt organizations can avoid penalties and interest by avoiding common errors when filing their tax returns. IRS warns of a few common mistakes such as

• Failing to file on time or requesting an extension.
• Not disclosing all sources of income, including income from unrelated businesses.
• Failing to disclose expenses accurately, such as compensation paid to officers and directors.
• Failing to include all necessary schedules and disclosures.
• Failing to maintain adequate records and documentation to support the tax return.

Tax-exempt organizations should take the appropriate precautions to ensure that their tax returns are filed accurately and on time to avoid errors, including maintaining thorough records, checking their tax forms before submitting them, and seeking expert assistance like a tax professional as needed.

In case one need assistance in filing or disputing the tax owed, the IRS Audit Group from Los Angeles can help. IRS Audit Group is a tax audit representation company that helps taxpayers navigate the audit process and ensure that their rights are protected during the audit. We review your tax records and returns, communicate with the IRS, represent you at the audit, and negotiate with the IRS so that you don’t have to go through a stressful process. We ensure the best possible outcome for the clients. Contact us for a free consultation.

https://irsauditgroup.com/contact/

Telephone Number: (310) 498-7508

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Tax season can be a stressful time for those who run behind the filing schedule. Taxpayers who aren’t able to file their returns for tax season 2023 by April 18, 2023, deadline, can request an extension. Filing an extension will give an additional six months to file taxes. However, it is important to note that an extension does not give taxpayers extra time to pay any taxes owed. Taxpayers need to pay their federal income tax due by April 18, 2023, to avoid interest and penalties.

If you have missed paying the taxes and/or failure to file an extension before the deadline, the following options are the next actions available now.

Option 1: Pay Taxes as Soon as Possible.

If one owes taxes, it is important to pay them as soon as possible. If you are unable to pay the full amount, then can still make a partial payment to reduce the amount of interest and penalties. Taxpayers can make a payment online using the IRS Direct Pay system, which allows individuals to pay directly from their bank account. Taxpayers can also pay by credit or with a debit card, with certain additional fees associated with this method.

Option 2: Set Up a Payment Plan

The IRS gives an option for taxpayers who cannot pay the full amount owed all at once. They can set up a payment plan with the IRS. This will allow taxpayers to make monthly payments until the balance amount is paid in full. To set up a payment plan, an individual needs to fill out Form 9465.

There are two types of payment plans available: short-term and long-term. A short-term payment plan allows payment of the balance in full within 120 days. No extra fee associated with this plan, but interest and penalties will continue to accrue until the balance is paid in full. A long-term payment plan allows payment of a balance over a period of several months or years. There is a fee associated with this plan, and interest and penalties will continue to accrue until the balance is paid in full.

Option 3: Offer in Compromise

If the taxpayer is unable to pay the full amount owed and can’t set up a payment plan, they are eligible for an Offer in Compromise. This is an agreement between the taxpayer and the IRS to settle the debt for less than the full amount owed. To be eligible for an Offer of Compromise, one needs to demonstrate that paying the full amount owed would cause financial hardship. And also need to provide detailed financial information, including their income, expenses, assets, and liabilities. To apply for an Offer in Compromise, the individual needs to fill out Form 656. It is important to note that an Offer in Compromise is not guaranteed, and the IRS will carefully review the individual’s financial information before making a decision.

In case an individual has missed the tax season 2023 deadline and owes taxes; it is important to act as soon as possible. Filing an extension, paying taxes as soon as possible, setting up a payment plan, or exploring an Offer in Compromise are all options to consider. Be sure to consult with a tax professional to determine the best course of action for the specific situation.

 

IRS Audit Group is Los Angeles-based company that offers tax audit representation services to individuals and businesses facing IRS audits or disputes. The company’s team consists of CPAs, tax attorneys, and enrolled agents who have experience working on both sides of tax disputes. If you receive any mail from IRS regarding a tax audit, don’t panic and don’t delay, contact a tax professional who is experienced in handling IRS audits by us. Contact us for a free consultation on understanding your tax situation.

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The Internal Revenue Service (IRS) has recently announced that around 1.5 million people across the country have not yet claimed their refunds for the tax year 2019. However, the deadline to file the returns is July 17, 2023, which is three years after the usual deadline. Due to the COVID-19 pandemic crisis, the IRS deferred the deadline for 2019 unfiled returns. The average median refund for 2019 is $893, and the IRS has estimated that $1.5 billion in refunds are still unclaimed.

Many taxpayers may have forgotten or ignored their tax refunds since 2019 due to the pandemic. To prevent losing out on the opportunity, taxpayers need to submit their refund requests prior to the deadline. Typically, individuals have three years to file their tax returns and request any refunds.

While many people would have missed out on filing their tax returns due to the unusual situation caused by the pandemic, some stand to lose more than just their refund of taxes withheld or paid during 2019. Earned Income Tax benefit (EITC) is a tax benefit that many low – and moderate-income employees are eligible for. The credit’s maximum value for 2019 was $6,557. The EITC provides assistance when an individual or family’s income is below a specific threshold. Those who qualified for the EITC in 2019 had incomes below particular thresholds, based on the number of qualifying children.

Taxpayers requesting a 2019 tax refund should also be aware that their checks will be held if they fail to file tax returns for 2020 and 2021. Additionally, the refund will be applied to any amounts still owed to the IRS or a state tax agency and may be used to offset unpaid child support or past-due federal debts, such as student loans.

Where To Obtain Essential Documents for Filing 2019 Tax Return?

Even though the tax year was three years ago, the IRS has offered taxpayers several ways to access the data they need to submit their 2019 tax forms. To ensure taxpayers have enough time to file before the deadline, IRS advises people to get started as soon as possible. One approach is to ask their employer, bank, or other payers for copies of important records like Forms W-2, 1098, 1099, or 5498. Another choice is to order a free wage and income transcript via Get Transcript Online at IRS.gov. For many taxpayers, this instrument is by far the quickest and easiest choice. As an alternative, individuals can submit Form 4506-T to the IRS to obtain a “wage and income transcript.” However, it is essential to plan since written requests can take several weeks.

 

Depending on a household’s tax circumstances, the actual refund amount can change. Therefore, to avoid missing the deadline, taxpayers are urged to review their records and start gathering documentation.

IRS Audit Group is a tax audit representation firm located in Los Angeles, California. If the IRS requires more information to validate your tax return filing, they may ask for it, and in rare cases, they may initiate a tax audit via mail notice. In such situations, it is crucial to have the assistance of a licensed tax professional like the ones at IRS Audit Group. IRS Audit Group is comprised of qualified CPAs and IRS Enrolled Agents. They can analyze your tax situation and help alleviate the burden of dealing with an IRS audit. Having proper representation in an IRS audit is essential, and the IRS Audit Group can provide the necessary support to navigate the process successfully. To learn more about our services, visit the website and contact us for further information.

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Cryptocurrencies and other digital assets have experienced an increase in activity and acceptance by the public in recent years. For this Tax Season 2023, the IRS has increased its efforts to provide assistance to taxpayers on the tax treatment and reporting requirements related to these digital assets. The IRS has introduced the new term “digital assets“ to refer to “virtual currencies”.

What is Digital Asset?

Any digital representation of value that is on a cryptographically protected distributable ledger or any other equivalent technology as specified by the Secretary is referred to as a digital asset, according to the IRS. The IRS lists a number of instances of digital assets, including NFTs, stablecoins, as well as virtual currencies like a cryptocurrency that can be used for payments (non-fungible tokens that are unique digital identifiers recorded in a blockchain).

Disclosure on Individual Tax Return 

To assist taxpayers in providing accurate answers, the guidelines for answering the question have been clarified and broadened in this tax year 2022 forms. Every individual filer must respond to the question with simple “yes” or “no” answers on the front of Form 1040, U.S. Individual Income Tax Return, whether they received or sold a digital asset in the tax year 2022, regardless of whether they are associated with digital assets or not. The subject, which is now on 2022 forms, gives more information and specificity to help taxpayers understand when to correctly mark the “Yes” or “No” boxes.

When to Check “Yes” Or “No”?

In general, if a taxpayer got digital assets in the form of a payment, prize, or award, they should check “Yes”. Also, a taxpayer should select “Yes” if they obtained digital assets as a result of mining or a hard fork (the division of a cryptocurrency into two). A taxpayer should also tick “Yes” if they have given up any other financial stake in a digital asset by payment, sale, exchange, or swap for another digital asset. Check “No” if a taxpayer simply owned digital assets during the year without engaging in any transactions. A taxpayer should also select “No” when transferring digital assets between accounts that share the same owners or when buying digital assets with money that isn’t digital.

How to Report Digital Asset Income?

Digital asset income is reported in much the same way as other revenue, mostly dependent on the source of the income. If digital assets are received in exchange for work, the taxpayer must disclose the value of those assets as wages on your tax return 2022. If the digital assets received were payment for services provided, the value of those assets would be reported on Schedule C, Profit or Loss from Business. Similarly, Schedule C would also record any such dispositions of digital assets to clients made in the course of a trade or company.

If digital assets are held as capital assets and sold, exchanged, or transferred it during the tax year 2022, the investor must use Form 8949, Sales and Other Dispositions of Capital Assets to calculate the gain or loss from that activity. The gain or loss is then reported on Schedule D, Capital Gains, and Losses. If, however, digital assets were transferred to an individual as a gift other than the taxpayer’s spouse during the tax year 2022, Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, will generally need to be filed if the value exceeds $16,000.

An incorrect or false response to the updated digital asset question could create complications for taxpayers in the future. For instance, an incorrect response may result in various types of penalties. The advice and assistance from knowledgeable Dual Licensed Tax Professionals and CPAs might be helpful when deciding how to answer the digital asset question instance.

IRS Audit Group is a tax audit representation firm in Los Angeles, California. Usually, in a few cases, the IRS may ask for more information to validate the tax return filings. But rarely, IRS may like to audit your tax information through a letter of notice via Mail. In such cases, it is important to engage a tax professional like ours to represent your tax audit. Our licensed professionals comprise qualified CPAs and IRS Enrolled Agents. They can analyze your tax situation and help alleviate your burden. Please contact us for more information. https://irsauditgroup.com/contact/

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The Internal Revenue Service (IRS) has issued warnings of new scams that urge taxpayers to use wage information on a tax return to claim false credits in hopes of getting a big refund. The new scheme circulating on social media encourages people to use tax software to fill out a Form W-2 to include false information. Scam artists encourage taxpayers to make up numbers showing large amounts of income and related withholding. Then, the scammers suggest simply e-file a bogus tax return to snag a large refund due to the amount of fake withholding. This deliberate misinformation about inflated income is used to take advantage of refundable tax credits.

Scam Variations

Two variations of this scheme are also being seen by the IRS; both involve misusing Form W-2 wage information in hopes of generating a larger refund.

• One variation involves scammers suggesting taxpayers file Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, to apply for a credit based on earnings made as an employee rather than a self-employed individual. These credit dates to the pandemic period for 2020 and 2021 and can’t be accessible for 2022 tax returns.
• Another variation of this scam involves taxpayers making up fictional employees that they claim are employed in their household and using Schedule H, Household Employment Taxes. Then, taxpayers file for a refund based on false sick and family wages they never paid in the first place.

Many such scams, where taxpayers suggesting to claim huge refunds by filing the tax return electronically in hopes of getting a substantial refund.

Vigilance

The IRS reminds taxpayers that they are actively watching for this scheme and others along with the Security Summit partners in the tax industry and the states. In addition, the IRS works with payroll companies and large employers—as well as the Social Security Administration—to verify Form W-2 information.

Penalties

Falling for such scams unknowingly or deliberately for getting viral on social media will be subject to a wide range of penalties. This may include a frivolous return penalty of $5,000. Filers also run the risk of criminal prosecution for filing a false tax return.

 

What To Do?

Seek out tax advice from credible sources, including the IRS website, and consult trusted tax professionals. Ignore advice from viral reels and videos that sounds too good to be true. And please do not share such contents which misguides other taxpayers. For anyone who has participated in one of these schemes, there are several options that the IRS recommends. People can amend a previous tax return or consult with a trusted tax professional.

 

IRS Audit Group is a tax audit representation firm from Los Angeles, California. The company employs a team of certified tax lawyers who possess expertise in both state and federal tax audits. Irrespective of the client’s location, these tax professionals can evaluate your audit situation and represent you before the IRS to secure a favorable outcome for the client. Please contact us for more information. https://irsauditgroup.com/contact/

Telephone Number: (310) 498-7508

info@irs-audit-group.com