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Smith Dickson

October 2018

Smith Dickson repeats as champs at 7th Annual Bocce Invitational charity event

Smith Dickson was proud to sponsor the recent "7th Annual Bocce Invitational" to benefit the Crohn's & Colitis Foundation. The event, held at IL Fornaio restaurant in Irvine, was attended by Orange County business leaders and raised thousands of dollars for the organization.

An exciting highlight for our Smith Dickson team was repeating as champions of the Bocce tournament (we also won in 2017)! The event was fun for all involved and we enjoyed supporting such a worthwhile cause.

More photos …
http://smithdickson.com/news-resources/firm-news/


12 red flags that can trigger an IRS audit

IRS tax returns chart

The number of tax returns examined by the IRS drops every year, to the point where the agency now audits just 0.5 percent of all returns - but that still amounts to over a million squirming taxpayers.

With that in mind, here are a round dozen red flags that will draw the IRS's attention to a return.

  1. Misreporting or not reporting income: Making sure that the income from W-2s and 1099s matches the income reported on the return is critical. Among other things, it's easier than ever for the IRS to access and compare the amounts reported — making it harder and harder to get away with discrepancies, which then stand out like sore thumbs.
  2. Earning more than $200,000: In Fiscal Year 2017 (the most recent year for which data is available), the IRS audited just 0.2 percent of most returns of taxpayers with under $200,000 in income — but it was four times as likely to audit those with between $200,000 and $1 million in income, looking at 0.8 percent of those returns.But the real red flag is earning of $1 million — the IRS audited 4.4 percent of those returns in 2017.
  3. Big changes in income: Whether it's a scary drop or a significant increase, major changes in income catch the IRS's eye. Unusually high charitable deductions: The IRS has been implementing stricter rules for documenting charitable giving for some time, as well as paying attention to claims for deductions than are higher than average for the taxpayer's income. For next year, the raising of the standard deduction in the Tax Cuts and Jobs Act is expected to significantly decrease the number of people who itemize their charitable deductions — which could have the unexpected side effect of making unusual claims stand out even more.
  4. Unusually high charitable deductions:The IRS has been implementing stricter rules for documenting charitable giving for some time, as well as paying attention to claims for deductions than are higher than average for the taxpayer's income. For next year, the raising of the standard deduction in the Tax Cuts and Jobs Act is expected to significantly decrease the number of people who itemize their charitable deductions — which could have the unexpected side effect of making unusual claims stand out even more.
  5. Unusually low salaries: The IRS takes a close look at S corporation compensation practices, particularly if the salary paid to a principal owner looks suspiciously low.
  6. The wrong Social Security number: Between concerns about ID theft and underreporting of income, returns with inaccurate Social Security numbers or discrepancies between the numbers on source documents and the return itself, will often draw added scrutiny, and possible rejection.
  7. Hobby losses:The IRS has some very specific rules and guidelines for what qualifies as a business and what's just a hobby that happens to cost a lot of money, and some of those hobbies, like horse racing and horse breeding, will often generate increased attention.
  8. Inconsistent alimony reporting:Since those who aim to deduct alimony need to report the Social Security number of the ex-spouse to whom they're paying it, it's easy for the IRS to detect if the claim matches what was actually paid. Note that, thanks to the Tax Cuts and Jobs Act, alimony for divorce settlements made after Dec. 31, 2018, will no longer be deductible.
  9. Home offices: It's perfectly legitimate to claim a home office — but it has to meet the strictures of the Tax Code and the IRS's guidance. With too many taxpayers attempting to claim their living room because they sometimes answer work-related e-mails in it, this is a red flag for auditors.
  10. Overly rounded numbers: A procession of suspiciously even figures draws the eye. A certain amount of rounding is acceptable, but experts generally suggest going for the nearest dollar, rather than the nearest ten or hundred — it stretches the imagination to suggest that all of a taxpayer's expenses are either $50 or $100. That said, in these days of electronic receipts and computers that do all the calculations, if an exact figure is available, that's the best bet.
  11. Big meal and entertainment expenses: From all the millions of returns they receive, the IRS has a pretty good sense of what most types of businesses spend on meals and entertainment, so claiming outsized expense deductions will draw their eye. This will be even more of an issue during next tax season, when the TCJA's stricter limits on the deductibility of business meals and entertainment expenses go into effect — which means businesses should be paying attention to those limits right now.
  12. Owning a cash business: It's much easier for a business that deals in cash — think restaurants, bars, convenience stores and the like — to hide or misreport income, so the IRS is more likely to examine the return of an individual who owns one.

Source: "Accounting Today"


OCBJ article: "Litigation Support for Real Estate Disputes"

Real Estate Law imageDebbie Dickson recently wrote an article in the Orange County Business Journal's "Real Estate Law" special supplement. The article "Litigation Support for Real Estate Disputes" covered several recent Smith Dickson engagements:

  • Misappropriation of Funds / Fraud
  • Creditors' Rights
  • Probate/Trust Beneficiary Disputes
  • Development and Contractor Disputes
  • Escrow and Title
  • High-Stakes Marital Dissolution Matters

READ ARTICLE


Tax Calendar

Smith Dickson is pleased to provide our year-round "Tax Calendar" available on our website. Reference it for key dates for individuals, businesses (of all types), employers, and estates/fiduciaries.

Some of the important upcoming due dates:

  • Sept. 15: Individuals —Estimated Tax Quarterly Payment
  • Sept. 15: Employers — Deposit withholding due for Social Security, Medicare, withheld income tax, and nonpayroll withholding
  • Sept. 15: Corporations, S-Corporations, LLCs, Trusts— Tax returns due
  • Sept. 15: Corporations — Tax installment due. Deposit the second installment of estimated tax for current year.

Be sure to contact us to discuss your tax questions and needs.


ABOUT SMITH DICKSON

Smith Dickson is a full-service Southern California CPA firm that specializes in providing high-quality services designed to create long-term value for our clients. Our services include accounting, tax compliance and planning, litigation support, business consulting, and estate/trust tax compliance. Please contact us with your questions.

Copyright © 2018 Smith Dickson, an Accountancy Corporation. All Rights Reserved.
18100 Von Karman Ave #420 | Irvine, CA 92612
(949) 553-1020

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