Don’t Fear the Tax Man
by Anita Brooks
The call came when I was in Iowa for a speaking circuit. I’d spoken to my husband less than an hour before, so I knew it was important.
“Hey Babe, what’s going on?” I said.
“We got a certified letter in the mail. From the Internal Revenue Service.”
The area I was driving through didn’t have good cell coverage, so I pulled my car to the side of the road. “Can you read it to me?”
When he finished, I groaned. “We’ll have to deal with it when I get back.”
Later that week, I faced multiple stacks of paperwork: a witness questionnaire for an upcoming court hearing I would testify at, medical forms for a family member’s procedure and a business coaching proposal I needed to finish. And of course, the dreaded IRS packet. Thankfully, I had a bookkeeping background, so I knew the audit, though intimidating, was nothing to panic over. If you have your financial house in order, there’s no need to fear the tax man.
Every tax return is as unique as the people it represents, so you can’t compare your tax situation to someone else’s. Two families may appear to have similar financial situations—husband and wife, three kids, same income—but when filing their annual return, one might pay in, while the other gets a small refund. So what makes the difference?
Often, it’s as simple as how you have your withholdings set up for payroll. Many people don’t know how to fill out their W-4, so they put a number down and hope it’s right. But this can bite you at tax time.
Some don’t have enough deductions to itemize, where you list individual expenses to reduce your income tax liability. If you cannot claim itemized deductions, your preparation is as simple as entering the information from your W-2 onto the tax return, and taking the standard deduction the government allows. When you file your annual return, depending on your payroll withholdings, you will either pay more in or get a refund.
But some people can further reduce their tax costs through legal deductions that exceed the standard allowance. Check with your tax preparer to make sure you are taking advantage of all your legal options. Some may include: child care, medical expenses, charitable contributions, mortgage interest, personal casualty losses incurred in a presidentially-declared disaster, among others.
My tax audit was a bit more complicated, because I’m self-employed as an author, speaker and life coach. The year was 2016, but the IRS was auditing my 2013 tax year.
I pulled my 2013 banker’s box, in order to make copies of every deductible receipt as requested from the government. I soon learned that thermal receipts from restaurants, office supply stores, and other businesses don’t always keep well, making them difficult to read when copied. (I now hand write the business name, total paid and the reason for the purchase on all thermal receipts.)
The IRS also required that I provide duplications of all my mileage logs, including beginning and ending odometer readings, miles traveled to and from, along with the business purpose for each trip. Proof of my odometer reading for 2013 was also needed, so I used my license renewal.
It took a couple of months for me to pull everything together, including photos of my home office. But a few weeks after I submitted the information, I received a letter telling me all looked well, except for one issue.
The agent wanted to disallow mileage for making supply purchases, and referenced a particular tax code. There was only one problem, she was wrong. So my tax preparer sent a letter with the correct tax code for my allowance, and in less than a month, the finding was overturned. Our audit came out clean.
Hopefully you never face an audit, but whether you do or not, the following reminders may help.
- Review your W-4 with your tax preparer to ensure the payroll deductions you are claiming fit your situation. Update annually.
- Documentation is required to support all tax claims.
- Interpretation of some tax codes can be subjective, so it’s important to use a good preparer who specializes in your field or tax status. Laws change frequently.
- Remember, you must give Caesar what is Caesar’s, but not a penny more. (Matthew 22:15-21)
- Some tax laws are outdated, seek legislative help if you want to see a change.
- Don’t panic if you get an audit letter. Remember, IRS agents are human, and most are not unreasonable.
Few of us like to pay income taxes, but they do support order for our democratic society. So do your part, pay your bills, but deduct all you can.
Anita Brooks motivates people to dynamic break-throughs, blending mind, heart, body and spirit, as an Inspirational Life Coach, International Speaker, Certified Personality Trainer and Common Trauma Expert. A multi-published, award-winning author, Anita’s titles reach audiences in the Christian and general marketplaces. Her mission is to help people make fresh starts with fresh faith, sharing hope and healing from the page and the stage. Her latest book, Exceedingly: Stories, Skills, and Strategies for Unearthing Your Abundant Purpose releases in 2019 through Kregel Publishing. Keep up with Anita on social media or at anitabrooks.com. Email email@example.com
We’d like to hear from you. Please share your comments below or like us on your Facebook page. Be sure to check back each month for more articles and products available at your local Christian bookstore.