Irs Gambling Joke
Many taxpayers ask: How can I avoid an IRS audit? There’s no 100 percent guarantee that you won’t be picked because some tax returns are chosen randomly. However, completing your returns in a timely and accurate fashion with your trusted HK tax adviser certainly works in your favor, and it helps to know the red flags that might catch the attention of the IRS.
What are your chances of being audited? For individuals, it depends on your income. In fiscal year 2013, returns reporting income under $200,000 stood a 0.88 percent chance of an audit. Those with incomes of $200,000 and more had a 3.26 percent chance. If your income was $1 million or more, you had a 10.85 percent chance.
What entries on your return are likely to result in a letter from the IRS? Here’s a list of 23 items some tax preparers believe can trigger an audit. Some items only apply to individuals or self-employed people who file a Schedule C, while others apply to both individuals and businesses. In some cases, items are likely to only generate a letter from the IRS requesting documentation for the item.
If you’re involved in crowdfunding, seek the guidance of your HK tax adviser to ensure your activities are properly reported on your tax return. Gambling losses. You’re allowed to deduct losses on Schedule A up to the amount of your winnings, but the IRS knows that many taxpayers don’t keep the required records. He used his work address for his gambling correspondence: W-2Gs (the IRS form used to report gambling winnings), wire transfers, casino mailings. Even his best friend and brother-in-law, Carl. Joke here) or similar log of your losses and winnings. You can find more record keeping details based on the type of gambling you prefer, such as Keno, Bingo, poker, horse racing, etc., in IRS Publication 529.
The IRS isn’t leaving gambling reporting to chance. It has issued new final regulations clarifying and expanding the rules for payors of slot, bingo and keno winnings. Most notably, in response.
1. Outsized charitable contributions. The IRS publishes data on the average size of charitable contributions for various income levels. If you take a deduction for an amount that is much larger than the averages, you could hear from the IRS.
2. Large property contributions. Significant charitable contributions of property require an appraisal and certain return attachments. Appraisals are often challenged by the IRS.
3. Unmatched alimony. For example, if you take a deduction for $24,000 of alimony, your ex-spouse should be reporting $24,000 of income.
4. High mortgage interest. The maximum amount of qualified home indebtedness is $1.1 million (including home equity loan). A mortgage interest deduction that’s in excess of a certain percentage of the debt limit could indicate an excessive deduction.
5. Unreported income. Failure to report gambling winnings, interest and dividends, non-employee compensation (1099-MISC), K-1 items, etc. may just trigger a letter and bill from the IRS — or it could generate an audit.
6. Unreported income from “crowdfunding.” Entrepreneurs, artists, charities, and others may find it easy today to raise money on the Internet through crowdfunding websites.
If the money starts rolling in, these individuals and organizations likely have to report it to the IRS as taxable income. (Expenses associated with the activities can be claimed as deductions.) Many people raising money online view their endeavors as non-taxable hobbies. This could eventually result in an IRS audit.
If you’re involved in crowdfunding, seek the guidance of your HK tax adviser to ensure your activities are properly reported on your tax return.
7.Gambling losses. You’re allowed to deduct losses on Schedule A up to the amount of your winnings, but the IRS knows that many taxpayers don’t keep the required records.
8. Miscellaneous itemized deductions. Breaking the two percent of adjusted gross income threshold is difficult, so large miscellaneous, itemized deductions may perk the interest of the IRS.
9. Foreign bank accounts. Checking the box indicating that you have a foreign bank account on Schedule B could increase your chances of an audit. However, not checking the box when you should could, too. The IRS continues to get information on many foreign bank accounts.
10. Unreimbursed employee business expenses. These expenses may be deductible, but substantial amounts are likely to raise questions because they are frequently reimbursed by an employer. If the expenses involve travel and entertainment or auto usage, your chances of hearing from the IRS may increase further.
11. Cash transactions. Banks and merchants are required to report cash transactions in excess of $10,000.
12. Rental losses of a real estate professional. A qualifying individual can deduct rental losses in excess of the usual $25,000 limit. Meeting the required time limit involved in real estate activities and substantiating it isn’t easy. Checking the box on Schedule E could increase your audit chances.
13. Casualty losses. This can be a complicated area where appraisals and other outside information may be required.
14. Bad debt losses. Again, this is often a complex area. Many taxpayers lose on this issue because they can’t show a bona fide debt existed or that a loss occurred in an earlier or later year.
15. Home office. If you use a portion of your home exclusively for your business, you can deduct the expenses and depreciation associated with the space. However, you have to show the business connection and that the space was used exclusively for business. Both can be challenged by the IRS. The tax agency can also question the expenses involved in a home office. There’s plenty of opportunity for an IRS auditor to make adjustments. In general, the higher the percentage of the home claimed for business, the greater your audit chances.
16. Day-trading losses. Claiming to be a stock market day trader and taking losses on Schedule C is a red flag.
17. Net operating loss. If your business (sole proprietorship, S corporation, partnership) has losses, you may have a net operating loss (NOL) that can be carried back or forward to offset income in other years. You may be asked to substantiate the loss if you claim a refund for an earlier year or on a later return where the NOL is used.
18. Rental losses. These could be challenged if there’s no revenue from the property.
19. Hobby losses. Multi-year losses on Schedule C (or a pass-through entity such as an S corporation) may be scrutinized, particularly if the business is listed as one that has elements of personal pleasure, such as horse breeding, photography, or auto racing. Your audit chances increase if the losses offset substantial other income on the return.
If you file a business return, there are other triggers. Some of them also apply to rental properties.
20.Travel and entertainment. Because of the recordkeeping requirements, and the fact that some deductions can be questionable, this is a ripe area for the IRS.
21. Auto usage. The IRS is aware that many taxpayers fail to keep the required records, making this a fruitful area for an IRS adjustment during an audit.
22. Repairs and maintenance. What business property owners believe is a repair and what the tax law considers a repair is often different. The IRS may require you to capitalize and depreciate expenses that you deducted.
Irs Gambling Expenses
23. Zero officer salaries for an S corporation. If an S corporation is active, showing no salary for officers is a red flag.
These are only some of the items that can trigger an audit. What should you do if you have them on your return? If you’re entitled to tax breaks, it doesn’t make sense not to claim them. Just make sure you have the required records and tax law justification to back them up. For example, if you’re not sure if a part business/part personal trip is deductible, contact us at 330-453-7633 for a professional opinion.
The IRS decides to audit Grandpa, and summons him to the IRS office.
The auditor was not surprised when Grandpa showed up with his attorney.
The auditor said, “Well, sir, you have an extravagant lifestyle and no full-time employment, Which you explain by saying that you win money gambling. I’m not sure the IRS finds that believable.”
“I’m a great gambler, and I can prove it,” says Grandpa.
“How about a demonstration?”
The auditor thinks for a moment and said, “Okay. Go ahead. “
Grandpa says, “I’ll bet you a thousand dollars that I can bite my own eye.”
Irs Gambling Jokes
The auditor thinks a moment and says, “It’s a bet.”
Grandpa removes his glass eye and bites it. The auditor’s jaw drops.
Grandpa says, “Now, I’ll bet you two thousand dollars that I can bite my other eye.”
Now the auditor can tell Grandpa isn’t blind, so he takes the bet. Grandpa removes his dentures and bites his good eye.
The stunned auditor now realizes he has wagered and lost three grand, with Grandpa’s attorney as a witness.
He starts to get nervous.
“Want to go double or nothing?” Grandpa asks. “I’ll bet you six thousand dollars that I can stand on one side of your desk, and pee into that wastebasket on the other side, and never get a drop anywhere in between.”
The auditor, twice burned, is cautious now, but he looks carefully and decides there’s no way this old guy could possibly manage that stunt, so he agrees again.
Grandpa stands beside the desk and unzips his pants, but although he strains mightily, he can’t make the stream reach the wastebasket on the other side, so he ends up urinating all over the auditor’s desk.
The auditor leaps with joy, realizing that he has just turned a major loss into a huge win.
But Grandpa’s own attorney moans and puts his head in his hands.
Irs And Gambling Man Jokes
“Are you okay?” the auditor asks.
“Not really,” says the attorney.
“This morning, when Grandpa told me he’d been summoned for an audit, he bet me twenty-five thousand dollars that he could come in here and pee all over your desk and that you’d be happy about it!”
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