document.write('<p><b><font class="heading">IRS Targets: What to Do If You Are One Of Them</font></b></p><p><b><font class="text">The ');
document.write('IRS Line of Fire – Why All the Gun Smoke?</b></p><p>Even though the IRS is responsible for successfully collecting $1.');
document.write('6 trillion in gross collections for 1997, there is still an estimated $500 billion in shortchange produced by drug sales');
document.write(', organized crime, and other illegal activities. This huge sector of missed collection has come to be known as the <i>un');
document.write('derground economy</i>. This underground economy is being brutally attacked by the IRS and as a result, innocent taxpayer');
document.write('s are often being punished.</p><p>So how are you supposed to know if you are in the line of fire? Well, the IRS has fi');
document.write('ve different categories it identifies as trouble areas. These are the <b>self-employed, people who work out of a home of');
document.write('fice, independent contractors, cash-intensive businesses, and finally, non-filers</b>.</p><p>&nbsp;<br><b>Bulls Eye On');
document.write('e – The Self-Employed</b></p><p>This is defined as an unincorporated business or profession in which net income is rep');
document.write('ortable by only one person and runs from people who own a service business (beautician, tutors, or home service and repa');
document.write('irs) to professionals (doctors, lawyers) to insurance agents or computer programmers and more.</p><p>For these types o');
document.write('f people, the IRS is focusing on the <i>type of business</i> for which the schedule C is filed, particularly if the busi');
document.write('ness type falls into one of the IRS target areas: service providers, professionals, or cash-intensive businesses.</p><');
document.write('p>If you are a sole proprietor and are at high risk for an audit, <b>the perfect solution might involve extracting yours');
document.write('elf from the sole proprietorship</b>/Schedule C category and transforming your business into a partnership or corporatio');
document.write('n. This can often remove yourself from the IRS hit list.</p><p>&nbsp;<br><b>Bulls Eye Two – People Who Work Out Of A H');
document.write('ome Office</b></p><p>As many as 40 million people work out of a home office, with at least 8,000 home-based businesses');
document.write(' starting daily. Of these, 1.7 million claimed home-office deductions on their 1996 tax returns, amounting to over $3.7 ');
document.write('billion.</p><p>The IRS decided in the early 1990’s that the people who take home office deductions comprise too large ');
document.write('a portion of the underground economy. Clearly, the IRS’s most obvious solution was to investigate more of these types of');
document.write(' filers.</p><p>To defend yourself against unnecessary audits, first make sure that you qualify for the Home Office Ded');
document.write('uction. <b>A good rule of thumb is: Those who can take the deduction</b> are those who spend most of their working time ');
document.write('in the office and conduct most of their important business there, like meeting with customers or patients <i>on a regula');
document.write('r basis</i>.<b>Those who <i>do not</i> qualify</b>are the ones spending most of their time in other places (gardener');
document.write('s, plumbers) and who only use their office for routine tasks like record keeping.</p><p>Once you’ve determined if you ');
document.write('qualify, taking care of the many different “gray areas” of the Home Office Deduction is the next step. Make sure you wat');
document.write('ch specific trouble areas like:</p><ul><li><p>Maintain a separate telephone number for the business</p></li><li><p>E');
document.write('ncourage customers to visit your home office on regular basis</p></li><li><p>Keep a visit log and a time log explainin');
document.write('g what time you spend in your home office (stress the important activities you performed there)</p></li><li><p>Make su');
document.write('re that business correspondence is sent to your home office, rather than to another place, like one of your biggest clie');
document.write('nts.</p></li></ul><p>&nbsp;<br>Following these simple tips can save you from horrible and costly IRS audits. More impo');
document.write('rtantly, the tips listed above are the most simplified of all. Meet with your accountant if any of these tips look unche');
document.write('cked in your overall goals or simply look like new ideas to you. If these look new, you’re under the audit gun already! ');
document.write('It’s important to take the time your business deserves to make sure your home office is audit-proof.</p><p>&nbsp;<br><');
document.write('b>Bulls Eye Three – Independent Contractors</b></p><p>Every additional worker classified as an independent contractor ');
document.write('means that the IRS loses tax dollars through unpaid FICA, withholding, and unemployment taxes, and through income tax de');
document.write('ductions as well. Wouldn’t the IRS be delighted if all of these independent contractors were reclassified as employees a');
document.write('nd this whole category disappeared! To try to make this a reality, the IRS has waged an all out attack on independent co');
document.write('ntractors.</p><p>Some of the tactics used by the IRS to turn independent contractors into employees include:</p><ul>');
document.write('<li><p>A 20-Factor Test</p></li><li><p>Third party leads (basically just informers)</p></li><li><p>A shift in IRS Ex');
document.write('amination Division resources</p></li><li><p>Unannounced audit blitzes by the Collection Department</p></li></ul><p>&');
document.write('nbsp;<br>There are specific, key steps employers and independent contractors can take to strengthen their respective pos');
document.write('itions. A contract between the business owner and the independent contractor as a key item to assess worker classificati');
document.write('on and the IRS uses this. <b>When drawing up a contract</b>, there are defined elements and precautions to help guard ag');
document.write('ainst reclassification.</p><ol><li><p>Specify the services to be rendered.</p></li><li><p>Use a defined starting and');
document.write(' completion date.</p></li><li><p>Make sure the contractor is controlling the procedures necessary for completing the a');
document.write('greed-upon services.</p></li><li><p>Make sure the contractor is in complete charge of supervising and directing how th');
document.write('e work will be performed.</p></li><li><p>Indicate all insurance to be provided by the contractor.</p></li><li><p>Try');
document.write(' to keep payments slightly sporadic – to justify treating the worker as an independent contractor.</p></li><li><p>Avoi');
document.write('d separately allocating funds for overhead costs like transportation and meals, since these should be included in the co');
document.write('ntract price.</p></li><li><p>Spell out that the training of the workers is the full responsibility of the contractor.<');
document.write('/p></li><li><p>Do not include a provision that states the contractor has an office or working space on the business ow');
document.write('ner’s premises – if he (or you) needs the space, he/you will use it…there is no need to spell it out in black and white.');
document.write('</p></li><li><p>Avoid paying bonuses.</p></li><li><p>Tell the contractor that if things slow down, that he will not ');
document.write('be given any more work to do. The business owner’s obligation is only for the work originally assigned and agreed upon.<');
document.write('/p></li></ol><p>&nbsp;<br><b>You can also strengthen your position as an independent contractor:</b></p><ol><li><p>I');
document.write('ndependent contractors should always be able to take on other assignments from other companies.</p></li><li><p>Contrac');
document.write('ts should never appear to be exclusive.</p></li><li><p>Independent contractors should be able to prove that they recei');
document.write('ve income from other sources. This will help legitimately determine their tax status as a self-employed person filing a ');
document.write('Schedule C.</p></li><li><p>Incorporate yourself. There is no obligation to issue a 1099 form to a corporation. As the ');
document.write('IRS hones in on the independent contractors reviewing 1099 forms, you will no longer be included in this group.</p></li>');
document.write('</ol><p>&nbsp;<br><b>Bulls Eye Four – NonFilers</b></p><p>An estimated 6 million people in the U.S. do not file any ');
document.write('income tax returns whatsoever. That number is actually down from 9 or 10 million four years ago. About 64% of nonfilers ');
document.write('are self-employed people who deal primarily in cash. They have been out of the system for an average of 4 years, are in ');
document.write('their peak earning years, and live affluently.</p><p>As a group, nonfilers account for almost $14 billion a year in lo');
document.write('st revenue to the IRS and cost each of the rest of us over $600 extra a year in taxes! The good news for those of us who');
document.write(' fall into this category is that an average of 45% of all people using the Nonfiler Reentry Program designed by the IRS ');
document.write('actually received a refund the first year filing a return!</p><p><b>So what do you do if you are a nonfiler?</b></p>');
document.write('<ol><li><p>Relax.</p></li><li><p>Go to a tax professional.</p></li><li><p>The tax professional will contact your loc');
document.write('al IRS office and inform them that he or she has a case of a nonfiling taxpayer who wishes to file.</p></li><li><p>The');
document.write(' tax professional will explain that information for the past however many years is missing or lost due to illness, divor');
document.write('ce, or natural disaster, etc.</p></li><li><p>The revenue office will probably cooperate by providing the professional ');
document.write('with income data entered under the matching program from the IRS computer listed under the taxpayer’s Social Security nu');
document.write('mber.</p></li><li><p>Next the tax professional will reconstruct the 1040, enlisting the taxpayer’s support to fill in ');
document.write('the information such as estimates of contributions, medical expenses, and other deductions. Revenue officers have been a');
document.write('ccepting reasonable estimates in cases like this.</p></li><li><p>This entire process could take as little as a few wee');
document.write('ks or as much as a few months, if items can’t be found immediately.</p></li><li><p>The IRS will add up to 25% in penal');
document.write('ties plus interest to the balance due. That is to be expected. However, perhaps you will be one of the 25% of nonfilers ');
document.write('who are due a refund!</p></li></ol><p>&nbsp;<br>No one will deny that so far, the majority of the IRS’s attempts to pu');
document.write('rsue the underground economy has been successful. But if you are unjustly attacked, you will be in the strongest positio');
document.write('n to hold on to what you’re entitled to if you understand how the IRS moves in and out of the underground economy, and i');
document.write('f you learn your rights.</p>');