From: Steve Grammont (islander@midmaine.com)
Date: Sat Dec 11 2004 - 16:46:18 PST
>Sounds like it might be great for a tax investigation too!
Larry speaks words of wisdom! Remember that the tax code is not like the
criminal code. *YOU* have to prove you are innocent, not the government
proving you guilty. In the unlikely event you get audited, and they
decide they don't like that deduction of yours, they will nail you for
back taxes, penalties, and interest which will likely make your head
spin. Oh, and due right away without any kidding around or they'll
threaten to put you into an 8x10 with Bubba the Bar Brawler.
Personal example... you'd think that if you don't live, work, own
property in, or do business in a state you moved out of that you'd not
have to owe them taxes. Well, that's the way the law reads, but it isn't
how my old home state thinks. I am currently being hounded for income
tax payments (and massive penalties) for years since I moved out of
state. I've documented that I don't owe them squat by filling out the
forms they told me would get things straightened out. Yet I've since
received two more demands for money from two other tax years which I
don't owe them for. My accountant has filed more papers with them so
we'll see what happens next.
If you are going to take a "gray area" tax deduction, do so knowing
exactly what can swing things in your favor (or against) if you are
audited. For example, if you are writing off a part of your house as a
home office and they auditors come in to find the room is clearly also
used for other purposes, you're probably screwed because you're not
supposed to do that and get the deduction. Years ago my accountant
advised me to not take such a deduction even though I was working 80
hours a week out of my house at the time. The home office rules have
improved since then, but I am still gunshy about it since I use my home
office room for all sorts of things other than business. The amount I
get to write off is simply not worth the risk of getting nailed.
Anyhoo... just 2 bits of tax advice from joe average taxpayer.
Steve
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