Sunday, April 17, 2011

10 Ways to Avoid a Tax Audit

Worried about extra scrutiny from the Internal Revenue Service?
While you can never completely "audit-proof" your business's income tax return, you can take actions that will greatly reduce your chances of being flagged.
Here are 10 ways to avoid a tax audit:
1. Choose your tax return preparer with care. Today, according to the recent National Taxpayer Advocate report, 60% of individuals and even a greater percentage of businesses use paid preparers to do their income tax returns. Yet, preparers now face more intense IRS review. If the IRS believes a preparer is claiming unwarranted deductions or taking other fraudulent steps on clients' returns, then the preparer's clients are at risk for audit.
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The IRS has eight tips for choosing a tax preparer. Key among them is to check the preparer's history to see if there has been any disciplinary action. For example, if you use an enrolled agent, check with the IRS' office of Professional Responsibility at (include the preparer's name and address).
2. Report all of your income. The IRS uses information returns, such as W-2s and 1099s, to cross-check income reporting. Under its document-matching program, the IRS' computers compare information on the forms with the income reported by taxpayers on their returns. If the information doesn't match, this leads to an automatic audit. But don't panic; it's merely a correspondence asking about the discrepancy. It can be easily cleared up by submitting an explanation by mail if you think you are correct, or paying the tax owed if the omission was your oversight and the IRS is correct.
Sole proprietors, freelancers and independent contractors who use the cash method of accounting may be vulnerable to year-end payment problems. For instance, a sole proprietor that performed work for a client may have received a payment in early January -- but the client might have mailed (and recorded) the payment in December. The client will include the payment on Form 1099-MISC for 2010, but it isn't taxable until 2011. What to do: Include the payment as it is reported on the 2010 return, but then subtract the payment and attach an explanation with the return. Then include the payment on the 2011 return, even though no 1099 will be issued for this year.
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3. Provide complete information. All questions should be answered and all required information should be included on the forms and schedules necessary for your return. That means if you're a sole proprietor, include your business code number, accounting method, and, where applicable, inventory valuation method on Schedule C. If information is missing, it could trigger a more extensive look at the return.
Also add information where necessary to explain entries or omissions that are not easily understood -- such as in the prior example, when income received in January is reported on a prior year 1099.
4. Avoid claiming deductions that are audit red flags. This advice is easy to give, but unfortunately, the IRS does not say which deductions are likely to provoke a closer look. There are no official audit red flags. While many warn that claiming a home office deduction can prompt an audit, there's no proof of this. If you meet the qualifications for claiming a home-office deduction, there's no good reason not to take the write-off. Check your eligibility in IRS Publication 587, Business Use of Your Home.
A number of years ago, the Government Accountability Office (formerly the General Accounting Office) compiled statistics on deductions claimed by sole proprietors to show the types of deductions relative to the amount of their revenue. Some tax professionals believe that taking more than the "average" can raise an IRS eyebrow, but again, there is no concrete support for this view. A business that is entitled to deductions, even if they are high relative to the amount of their income, should claim them -- but be prepared to prove entitlement if the return is questioned.
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5. Don't file certain forms or schedules. Some optional forms and schedules virtually guarantee an audit. For example, if you turn a hobby into a sideline and show a business loan, the IRS may question whether some of your deductions are legitimate. If that happens, you might file a Form 5213, which keeps the IRS from auditing you for the first five years of the business. If you can show that you're profitable in at least three of the years, then the business isn't a hobby and the losses in the other years aren't questioned. The problem: Filing the form virtually guarantees an examination at the end of five years.
Better way: If you have loss years, be prepared to prove that you are operating the activity with a profit motive.
6. Pay attention to details. Math errors or incorrect entries of Social Security numbers or tax identification numbers can easily trigger an inquiry into your return. Math errors can be greatly reduced by electronic filing rather than filing paper returns. In the past, the IRS had said that errors are less than 1% on returns that are filed electronically, compared with about 20% on returns submitted via paper. If an e-filed return has a math error, it won't be accepted; instead it is sent back for correction and refiling.
But information on electronically filed returns is only as good as the information you submit. Reporting $2,000 in income when it should have been $20,000 is your mistake and one that likely won't be noticed as a math error by a computer.
7. Mind your personal entries. If there are entries related to the personal side of your return, this can ultimately lead to scrutiny of your return activities. The IRS selects returns for audit in some cases based on a Discriminant Function System or DIF score, which is based on IRS experience with taxpayers claiming certain deductions or credits within set income levels. For example, if you claim charitable contributions that are higher than the average deductions for your income level, this could lead to a personal audit; the personal audit may be expanded to include your business activities.
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8. Change your business status. IRS Statistics show that you are 10 times as likely to be audited as a Schedule C filer than if you incorporate your business and elect S corporation status. While it costs a bit of money to incorporate, the move affords you greater personal liability protection and reduces your chances of being audited. In deciding whether to change your business status, include both tax and non-tax factors.
Note: Forming a limited liability company for one owner will not give you any audit protection, because the owner still files a Schedule C.
9. Watch your state tax return. The IRS has information-sharing agreements with the states. If you are audited at the state level and owe additional taxes because of omitting income or for other reasons, this information is shared with the IRS. The information may then prompt the IRS to contact you asking for additional tax payment or to audit your return in more depth.
10. Plan for an audit, just in case. Because the IRS conducts random audits from time to time (such as a three-year random audit program for S corporations in 2007 and a current three-year random audit program for employment tax returns), any return could be selected for review at any time. Be prepared:
• Compile good books and records for your business activities.
• Retain required receipts and other documentation.
• Use separate bank accounts and credit cards for your business and personal activities.
Retain the records and receipts for your tax return for a minimum of three years (the period in which the IRS usually has to audit a return). However, keep in mind that the period becomes six years if 25% or more of income is omitted from the return, and there is no limit when it comes to fraud.

What the?! Justin Verlander commits the balk of the year

By David Brown

Detroit Tigers right-hander Justin Verlander(notes) did a quick bit of thinking — just not quick enough to slip an illegal pitch past the Oakland Athletics. Or the umpires, for that matter.
Behind lefty Dallas Braden(notes) and four relievers, the A's beat the Tigers 6-2 on Saturday night, but not before a moment of levity when Verlander committed the balk of the year.
In the fifth inning, the A's led 3-1 and put a runner on first with David DeJesus(notes) batting. On the fourth pitch of the at-bat, Verlander stepped backward from the pitching rubber, but he found his body in the wrong position for a throw to first base for a pickoff attempt. Instead, he comically short-armed the ball toward home.
It rocketed toward the ground and appeared to hit an unprepared DeJesus on the bottom of his right foot before it rolled to the fence. Umpires called time, and DeJesus lobbied for a HBP. Off he went to first base on his own, but umps were too confused initially to make any ruling.
"What was that?!" Tigers analyst Rod Allen said.
A's manager Bob Geren called it "the strangest thing he had ever seen."
Both managers came out to question the play. Players in both dugouts showed quizzical looks. Verlander tried to hide a grin behind his glove.
So, what did happen?

After a conference, the umpires got it right: Verlander had thrown an illegal pitch. A balk was called, the runner on first base moved to second and DeJesus' at-bat continued. He eventually walked.
Here's Verlander's explanation:
"I went to go pick one and I didn't get my body turned," Verlander said. "The way I thought — and this was all in milliseconds — if I just throw it home, they won't call anything."
Rick Eymer of described it fittingly as something suited for a softball game. It resembled a crow hop. The A's didn't know what to think.
"That was the strangest thing I've ever seen," A's manager Bob Geren said. "It took like six coaches to try to figure out what he did."
Verlander found the whole thing funny.
"I saw the video of it and I couldn't help but laugh at myself," Verlander said. "It might be the first time it happened in general. I thought nothing could happen at the plate. It was funny talking to the umpires. They gave me a hard time about it, too."
Rightly so. Verlander got out of the jam in the fifth ("At least I did that right," Verlander said) but ended up taking the loss.

NC Police Say Toddler Accidentally Shot Himself - Winston-Salem News Story - WXII The Triad

NC Police Say Toddler Accidentally Shot Himself - Winston-Salem News Story - WXII The Triad


Johnson nips Bowyer at the line, wins at Talladega

TALLADEGA, Ala. -- In a wild, three-wide, six-car finish at Talladega Superspeedway, Jimmie Johnson nipped Clint Bowyer by a record-tying .002 seconds to win Sunday's Aaron's 499 Sprint Cup race.
With a push from Hendrick Motorsports teammate Dale Earnhardt Jr., Johnson surged past Bowyer about six inches from the finish line. The finish tied Ricky Craven's victory over Kurt Busch at Darlington in 2003 for the closest since the introduction of electronic timing and scoring in 1993.
Get your Jimmie Johnson gear!
The victory was Johnson's first of the season and the 54th of his career. Jeff Gordon ran third and Earnhardt was fourth.
Kevin Harvick, who was pushing Richard Childress Racing teammate Bowyer, finished fifth. Roush Fenway Racing teammates Carl Edwards and Greg Biffle finished sixth and seventh, and Mark Martin, who spent the afternoon in tandem with Hendrick teammate Gordon, finished eighth.
A wreck on Lap 140 wiped out two of the top championship contenders, Matt Kenseth and Kyle Busch. Contact between Joe Gibbs Racing teammates Joey Logano and Busch triggered the incident. Pushed by Logano, Busch spun to the inside and wiped out Kenseth in the process.
The cars of A.J Allmendinger and Denny Hamlin also sustained damage but were able to continue.
"I was just going straight on the bottom following Kurt [Busch] and got hit in the right-rear and put me straight in the wall," Kenseth said. "I don't really know what happened to cause that. Obviously, something happened beside me that got somebody into my right rear. I didn't even know it was coming, just driving straight hoping to miss the rest of the bullets and get to the end and just got in a wreck."
As the lead pack of cars headed into Turn 3 on Lap 90, fire erupted beneath David Ragan's No. 6 Ford. As the field began to slow, contact from Kurt Busch's No. 22 Dodge sent the No. 2 of Penske Racing teammate Brad Keselowski hard into the outside wall.
The Toyota of Kasey Kahne and the Fords of Marcos Ambrose and Daytona 500 winner Trevor Bayne were collected in the melee.
"That was one of the harder hits I've taken, just because it was so much of a frontal impact across the track, off the apron, all the way to the wall," Bayne said. "I don't know who got us. I saw the 6 blowing up in front of us, so I keyed up the mic. I'm like, 'It's getting crazy in front of me, Greg' -- I was on Greg Biffle's radio at the time. As soon as I said that they blew up, Greg got off of me because I yelled, 'Blowing up, blowing up.'
"He got off of me and at the same time the 2 car got hooked somehow. I don't know that they triggered each other; I just saw the 2 get hooked at the same time the 6 was on fire. He [Keselowski] goes across the track, I saw him hit the outside wall, but then I don't know who caught us in the right rear and sent us. But I thought we were safe. I was like, 'Man, that was close,' and about the time I said that I was headed toward the outside wall. So not a fun ride."

US Storms Leave Dozens Dead In Destruction's Wake - Winston-Salem News Story - WXII The Triad

US Storms Leave Dozens Dead In Destruction's Wake - Winston-Salem News Story - WXII The Triad

This was awful and all everybody can do is pick up the pieces and start over. God bless the families who lost loved ones during this storm.

At least 35 dead in 6 states after storm's rampage

AP Photo/The Fayetteville Observer, James Robinson
RALEIGH, N.C. – A furious storm system that kicked up tornadoes, flash floods and hail as big as softballs has claimed at least 35 lives on a rampage that began in Oklahoma days ago, then smashed across several Southern states as it reached a new and deadly pitch in North Carolina and Virginia.
Emergency crews searched for victims in hard-hit swaths of North Carolina, where 62 tornadoes were reported from the worst spring storm in two decades to hit the state. Ten people were confirmed dead in Bertie County, county manager Zee Lamb said. At least three deaths were reported in Virginia. Authorities warned the toll was likely to rise further Sunday as searchers probed shattered homes and businesses.
The storm claimed its first lives Thursday night in Oklahoma, then roared through Arkansas, Mississippi, Alabama and Georgia. Seven people each were killed in Arkansas and Alabama, two people in Oklahoma and one person in Mississippi, authorities have said.
In North Carolina, Gov. Beverly Perdue declared a state of emergency after reporting fatalities in at least four counties. But she declined to immediately confirm an exact number of deaths. She said the 62 tornadoes reported were the most since March 1984, when a storm system spawned 22 twisters in the Carolinas that killed 57 people — 42 in North Carolina — and injured hundreds.
"Our thoughts and prayers are with everybody in North Carolina who has been through this horrible day," Perdue said.
Daybreak brought news of a horrific death toll in Bertie County, a place of about 21,000 people about 130 miles east of Raleigh. The tornado moved through about 7 p.m. Saturday, sweeping homes from their foundations, demolishing others and flipping cars on tiny rural roads between Askewville and Colerian, Lamb said.
One of the volunteers who scoured the rubble was an Iraq war veteran who told Lamb he was stunned by what he saw.
"He did two tours of duty in Iraq and the scene was worse than he ever saw in Iraq — that's pretty devastating," Lamb said.
As dawn broke, dozens of firefighters, volunteers and other officials were meeting in a makeshift command center to form search teams to fan out to the hardest-hit areas.
"There were several cases of houses being totally demolished except for one room, and that's where the people were," he said. "They survived. Pretty devastating."
Authorities in North Carolina said they would provide more details of the death toll later Sunday after checking on the reports of fatalities in at least four counties and in the capital city of Raleigh. Search and rescue teams operated through the night, Perdue said, with damage assessments starting in earnest Sunday after daylight.
"There's a lot of work that needs to be done in these areas that are most heavily impacted," said Doug Hoell, the state's director of emergency management. "There's a lot of debris out there that's got to be cleaned up."
In Virginia, disaster officials said one apparent tornado ripped across more than 12 miles through Gloucester County, uprooting trees and pounding homes to rubble while claiming three lives. Another person was confirmed dead and another remained missing early Sunday after flash flooding elsewhere in Virginia.
Scenes of destruction across the South looked eerily similar in many areas.
In North Carolina, rooftops were ripped off stores, trees were plucked from the ground and scores of homes were damaged, Hoell said.
At one point, more than 250,000 people went without power in North Carolina before emergency utility crews began repairing downed lines. But scattered outages were expected to linger at least until Monday.
Among areas hit by power outages was Raleigh, a bustling city of more than 400,000 people where some of the bigger downtown thoroughfares were blocked by fallen trees early Sunday.
Police and rescue crews began conducting house-to-house searches later Saturday at a mobile home park in north Raleigh, where the storm snapped some trees in half, ripped others out of the ground and tossed some trailers from one side of a street to the other.
In Sanford, about 40 miles southwest of Raleigh, a busy shopping district was pummeled by the storms, with some businesses losing rooftops in what observers described as a ferocious tornado. The Lowe's Home Improvement Center in Sanford looked flattened, with jagged beams and wobbly siding sticking up from the pancaked entrance. Cars in the parking lot were flipped by the winds.
"It's very, very bad here," said Monica Elliott, who works at the nearby Brick City Grill. "We saw a tornado that just rode up over the restaurant."
Remarkably, no one was seriously injured at the Lowe's, thanks to a quick-thinking manager who herded more than 100 people into a back area with no windows to shatter.
"It was really just a bad scene," said Jeff Blocker, Lowe's regional vice president for eastern North Carolina. "You're just amazed that no one was injured."
Cindy Hall, a Red Cross volunteer and outreach minister at First Baptist Church in Sanford, said dozens of homes in the area were damaged.
"It wiped out our St. Andrews neighborhood, which includes about 30 homes," she said.
To the west, hikers stranded by flash floods had to be rescued.
In Virginia, Department of Emergency Management spokesman Bob Spieldenner, said an apparent tornado ploughed through communities of Gloucester County, destroying or damaging homes, uprooting trees in a quiet farming and fishing region along the Chesapeake Bay.
"I know it was a pretty long path," he said of the reported tornado. "They estimated it was 12 to 14 miles" based on 911 emergency calls.
Authorities said at least three deaths had been confirmed in Gloucester County and at least 60 were injured, most with minor injuries. Spieldenner said one person was killed when a vehicle ran into flash flooding near Waynesboro. Another person was missing and a third rescued.
He reported homes and mobile homes damaged and destroyed in a series of other Virginia counties and flash flooding west of Charlottesville that prompted water rescues — including four people rescued unhurt from a car that had plunged into deep water flowing over a street.

Wendy's Natural Cut Fries: Better Tasting, Yes. Natural, No

When Wendy's (NYSE: WEN - News) created its Natural Cut Fries With Sea Salt, which it introduced last fall and is now promoting in new TV ads this week, the company's product development team found a way to leave the potato skins on, make the fries crispier and give them a much tastier flavor. What they didn't manage to do, however, is make the fries an actual all-natural product. That, says CMO Ken Calwell, would be too difficult given fast food customers' demands for items that are cheap and can be hoisted through a car window.
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"People are saying they want high integrity ingredients, things their grandmother would have used, that don't look like they came out of a chemistry lab," Calwell explained in an interview with BNET. "But they're also saying I've got a family to feed and can only afford to spend about $4 on my lunch, and I've only got about a minute or two to eat it."
So instead of going the more expensive Five Guys route of making their fries fresh and in-house, Wendy's settled for "natural cut." What this means is that inside the processing plant, the potatoes skip the step of getting steamed at such a high temperature that the skins burst off. Wendy's spuds go straight to the high tech cutters where they're sliced.

©Image courtesy Wendy's
And Then the Not-So-Natural Part
Then come the not-so-natural parts. The fries are sprayed with sodium acid pyrophosphate, a chemical that prevents them from turning brown from two baths in frying oil -- one at the factory and the other at the store. They're also dusted with dextrose, a sugar derived from corn, for similar purposes. For comparison, Five Guy's fries don't need sodium acid pyrophosphate or dextrose because they're only fried once and aren't frozen.
And just like every other large fast food chain, Wendy's frying oil is dosed with dimethylpolysiloxane, a silicone-based chemical that helps keep the vegetable oil from getting foamy after countless rounds of frying. (Five Guys doesn't use dimethylpolysiloxane either because their peanut frying oil is more stable than the standard soybean and canola varieties.) Wendy's Natural Cut fries are also frozen like everybody else's, even though it's a big point of distinction for Wendy's that their hamburgers aren't.
Wendy's has also highlighted that it uses "100% Russet potatoes," but John Keeling of the National Potato Council says that this is not a selling point. "Virtually all processed French fries are Russets," he said in an email.
Taste and Compare
But the new fries do succeed in taste tests, even beating those at McDonald's, according to the company's research. Wendy's hired an outside firm to do a national taste test and the results showed that 56% of people taking the test chose Wendy's skin-on fries, whereas only 39% preferred McDonald's (4% had no preference). And Wendy's 6,600 stores, orders that include fries are up almost 10%.
Nutritionally, the skins on the fries add 1 extra gram of fiber per serving for a total of 6 grams in a medium. Although the sodium content went up by 43% to 500 milligrams for a medium, an increase that no doubt helps with the taste factor.
Calwell says that making Wendy's menu items more natural and more real is the company's "North Star."
"We're taking it product line by product line to make our food closer to this real ingredients story. Over time, you'll see our ingredient labels getting shorter and more of those high integrity ingredients. It just takes time," he said.

4/16/2011 Raleigh, NC and Wilson, NC Tornado Outbreak Footage.

Tornado in Wilson, NC - April 16, 2011

King man accused of raping a juvenile flees the area

King man accused of raping a juvenile flees the area: "A young man in King who was charged two years ago with the rape of a child is suspected of the rape of perhaps two other juveniles. The suspect, Christopher Lee Thomas, 20, of Meadowbrook Drive, ..."


Man Killed By Live Wire While Picking Up Storm Damage

Man Killed By Live Wire While Picking Up Storm Damage

Ariz. Legislature OKs presidential 'birther' bill

President Barack Obama speaks at a DNC fundraising event at Navy Pier in Chicago, April 14, 2011.
(AP Photo/Nam Y. Huh)
PHOENIX — The Arizona Legislature gave final approval late Thursday night to a proposal that would require President Barack Obama and other presidential candidates to prove they are U.S. citizens before their names can appear on the state's ballot.
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Arizona would become the first state to require such proof if Gov. Jan Brewer signs the measure into law.
Republican Rep. Carl Seel of Phoenix, the author of the bill, said the bill wasn't about opposition to Obama. "This bill is about the integrity of our elections," Seel said.
Thirteen other states have considered similar proposals this year. The proposals were defeated in Arkansas, Connecticut, Maine and Montana.
The bill won final approval from the state House in a 40-16 vote.
So-called "birthers" contend since the last presidential election that Obama is ineligible to hold the nation's highest elected office because, they argue, he was actually born in Kenya, his father's homeland. The Constitution said a person must be a "natural-born citizen" to be eligible for the presidency.
Hawaii officials have repeatedly confirmed Obama's citizenship, and his Hawaiian birth certificates have been made public. Even though the courts have rebuffed lawsuits challenging Obama's eligibility, the issue hasn't gone away.
"It's a fringe issue in my view, and it's going to cause people to look again at Arizona and say what's all this craziness going on there," said Democratic Rep. Daniel Patterson of Tucson, an opponent of the bill.
The Arizona proposal would require political parties and presidential candidates to hand in affidavits stating a candidate's citizenship and age and to provide the candidate's birth certificate and a sworn statement saying where the candidate has lived for 14 years.


Actor Nicolas Cage arrested in New Orleans

This booking photo released by Orleans Parish Sheriff's Office shows actor Nicolas Cage Saturday, April 16, 2011 in New Orleans. Authorities say...
(AP Photo/Orleans Parish Sheriff's Office)
This booking photo released by Orleans Parish Sheriff's Office shows actor Nicolas Cage Saturday, April 16, 2011 in New Orleans. Authorities say Cage has been arrested in New Orleans on charges of domestic abuse battery and disturbing the peace.