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There are two things in life you don’t want to watch closely as they are made. The first is sausages and the second is tax laws. While death and taxes are inevitable, death doesn’t get worse every time Congress meets. The constant push-pull of special interests, partisan and “pork barrel” politics leave us with an income tax system that is convoluted and overly complex.
The system has one saving grace: it’s semi-voluntary. For example, everyone knows that if you own a home, you may deduct the property taxes and mortgage interest. But you are not required to do so. You could file form 1040A or 1040EZ, forego deductions and “volunteer” to pay more taxes.
There are more opportunities in the IRC (Internal Revenue Code) then the common deductions that people confine themselves to. These opportunities are not well known and often ignored even by some tax planners, CPA’s and attorneys.
In future articles, I will give you a number of highly effective strategies that result in reducing income taxes, legally, without triggering audits. These strategies also enhance retirement, estate and investment planning.
For now, let’s concentrate on the tax season. There is something new that the IRS will implement during the tax-filing season. It started last year and will really take off this year. It will affect everyone and will result in numerous refunds denied or delayed, and many taxpayers will receive notice of additional tax and penalties due.
Here’s what its all about and how to avoid problems:
It’s called the Matching Program, started years ago to combat fraud in electronic filing, and it remains the prime reason for E-file rejections.
Here’s how it works: Names and social security numbers are matched with Social Security Administration (SSA) records. If there’s a mismatch, that person is removed as dependent. A couple filing jointly where the wife has not notified SSA of her name change will be removed from the tax form, the tax recalculated for the husband as a single, and the refund denied or a tax bill sent out. Divorcees who re-assume maiden names without notifying SSA will be denied Earned Income credit (if eligible.)
Misspellings have the same result. Sure you’ll eventually correct it. But who needs IRS problems?
This is how you avoid problems: Look at everyone’s SS card. If you don’t have them or they don’t match, contact SSA. If it’s late, file under the name on record with SSA, and correct later.
Will the IRS implement this efficiently? Who knows? They said they would. Why take a chance when a few simple steps will avoid a potential problem.