At one time or the other, most of us get involved in one kind of venture or another, sort of trying your hand at something different. Sometimes we make money in these ventures and the IRS can be counted on to expect its share of the profits. But what if you lose money in the venture, will you be entitled to a deduction on your return for the loss?
The first thing to keep in mind when picking a suitable tax preparer is the cardinal rule: you are responsible for your tax return. Translation – pick your tax return preparer carefully! Unqualified tax preparers may not only overlook legitimate deductions or credits that could cause clients to pay more tax than they should, but they may also make costly mistakes causing their you additional money in assessed deficiencies, penalties, and interests. A few rules to consider:
1. Unreported 1099 Income – This is perhaps the easiest way IRS can track down non-complying taxpayers. Every single Form 1099 issued to a taxpayer is only but a copy of the one in IRS records – IRS is aware of the income as it is also reported to them by the third party payer of compensation, interests, dividends, etc. Failure to report this income is one of the easiest flags for further review of tax returns.
When appearing before the IRS, for audits, collection actions and appeals, it is extremely critical to have effective representation to state and defend your interests.
Generally, only three classes of professionals are qualified to represent taxpayers before the IRS – Attorneys, Certified Public Accountants and Enrolled Agents. (Enrolled Agents are tax professionals who have successfully completed a set of examinations given by the IRS). Other professionals may represent taxpayers before the IRS but only relating to tax returns they prepared.