Many Americans have not noticed the paragraph above their signature line on the 1040 and other IRS tax forms that notifies the taxpayer that you sign your tax return under penalty of perjury and that you have examined the return and underlying schedules. Tax returns for many US taxpayers have become much more complex, especially those who have international bank accounts and investments, S-Corporation filers, high wage earners and business owners. The “turbo” software solution and other off-the-shelf tax packages have missed critical forms, declarations and other information required by the IRS in previous years, or allow the taxpayer to skip past sections they may not understand or wish to go through. This exposes US taxpayers to unnecessary risk, and if your tax return has been “fudged” a bit, the penalty of perjury opens you up to more serious consequences.
The IRS FBAR preparation and filing is one example of this. If you have more than $10,000 accumulated in all of your offshore bank and investment accounts at any point in a tax year – even if it is for a day – you are required to submit the IRS FBAR and associated schedules. The failure to include every account you hold a beneficial interest in is a serious matter. In the past year the IRS has been receiving detailed information from international banks, investment and financial accounts, and sovereign tax authorities around the world. This information includes details regarding account balances throughout the year, transactions and income all associated to your unique US taxpayer identification number, passport number or federal tax ID. The IRS has automated systems that compare this information with the data you’ve disclosed on past IRS tax returns. If you’ve understated anything, omitted any accounts or transactional details such as interest your return is flagged for investigation and an IRS audit.
S-Corporation returns must perform a fairly sophisticated calculation of “basis” which must be updated every year. Business owners and LLC members are often analyzed by IRS revenue agents searching for excessive deductions and under-reporting. The tax preparation and accounting professionals at Allen Barron prepare tax returns for individuals and businesses throughout San Diego. We invite you to contact us for a free consultation at 866-631-3470. Remembering that you sign your tax return under penalty of perjury and with the knowledge that the IRS does not consider ignorance of the law or tax code a valid excuse places a serious responsibility upon all US taxpayers.