In a previous article of mine, I reveal the fact that the people inside the IRS are more willing to help than to hinder your chances of lower taxes. This I know first hand after spending the “tax season rush” as part-time help, like Christmas help at Macy’s. Working full time at night for 3 months I got to know pretty well how things operate on the inside.
I can say first hand that the people within the IRS are normal, just as weird as everyone else. Everyone has been trained in a certain department and mine was the “Errors and Corrections” area. This means that tax forms would be routed to our area when the IRS computer had some kind of a problem. Often times the errors were simple and nothing more than a number listed on the wrong line of the 1040 form. Moving the number, usually made sense to the IRS computer and the tax form would then be queued for final processing and the taxpayer would be sent a check or notified of a deficit.
In my training, I had to become familiar with all the different schedules and forms which make up a typical 1040 package. What I found fascinating in the IRS protocol is that they expect the average taxpayer, the working stiff, to have some write-offs. They give you some, right off the bat. You get to deduct your dependents as well as are allotted exemptions which knock down your adjusted gross income, by somewhere around $10,000 if you do the math correctly.
If you don’t do the math correctly, and add it up short, for example, the person in the “Errors and Corrections” will correct the math and make sure it comes out in your favor. Problem is that even if you have a nice deduction out of those two items (exemptions and standard deductions), it still could leave you with a high tax bill. Ok, so where do you find more deductions? You find all the deductions you need to bring your adjusted gross income low enough so that you only owe the IRS a small amount of money; in the Schedule C.
You may find this surprising but, the IRS expects you, the average stiff, earning 30 to $150 thousand per year from an employer, to have some kind of a side business where you will be able to bury some of the expenses you and the family incur just living in the world. Even unemployment, if you’re collecting it, is taxable, so you must have a small business on the side that the IRS computer sees as a legitimate business, with normal business expenses that often times tip your profits into a negative. This is the beauty of the Schedule C, you have the ability to adjust your gross income to the point where, after your exemptions and deductions you are left with a small amount you actually owe.
May I give you a tip which could satisfy your need to get you taxes down? Be creative on a Schedule C, mark down theoretical numbers which are in-line with a small business expense, not outrageous, and the IRS computer will be able to swallow the fact that the money you say you earned (but at this point don’t need to prove) in your small business was not enough to keep up with your expenses and therefore you are deducting a loss from the 1040 Gross Income. Simple enough, just fill out the Schedule C (don’t forget to include it) and take a fair enough deduction in the first column of the 1040 tax form. If you have money in the IRS from withholding, factor in the right numbers to leave some of the money, a couple hundred dollars for the IRS computer and take the rest.
Union Consulting Inc has helped distressed taxpayers each year resulting in millions of dollars in tax savings.
