How to Keep the IRS Out of Your Life This Tax Season

How to Keep the IRS Out of Your Life This Tax Season

2 min read
Amanda Han

Amanda Han has been a CPA specializing in tax strategies for real estate, self-directed investing, and individual tax planning for over 18 years. She’s been investing in real estate herself for over 10 years with a focus on long-term hold residential and multifamily assets across multiple states.

Experience
As both a tax strategist and real estate investor, Amanda combines her passion of real estate investing with her expertise in tax. Her goal is to help investors with strategies designed to supercharge their wealth-building using entity structuring, self-directed investing, and income offset opportunities to keep more of what they make.

Her highly rated book Tax Strategies for the Savvy Real Estate Investor is amongst Amazon’s bestseller list. Amanda is also a frequent contributor, speaker, and educator to some of the nation’s top investment and self-directed IRA companies.

Amanda and her husband Matt MacFarland have a passion for animals and founded Animals for Armed Forces, a non-profit organization that has helped to place over 1,800 shelter pets with forever homes.

Press
Her cutting-edge tax strategies have been featured in prominent publications, including Money Magazine, Realtor.com, and AllBusiness.com. Amanda was a speaker at “Talks at Google” that features influential thinkers and creators. Amanda has also appeared in CNBC’s Smart Money Talk Radio, as well as BiggerPockets podcasts.

She is a 40 under 40 honoree by CPA Practice Advisor, showcased amongst the best and brightest talent in the accounting profession. Her firm Keystone CPA, Inc. was awarded a two-time winner of the Top CPA of Orange County Award by OC Metro Magazine.

Accreditations
She is certified by the CA State Board of Accountancy and is a member of the prestigious American Institute of Certified Public Accountants (AICPA) with clients across the nation.

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Now that tax time is in full swing, a question on a lot of people’s mind is, “Am I at high risk for an IRS audit?” Let’s face it, we all want to do as much as we can to save on taxes — but there are always little voices inside our heads that wonder:

Should I write this off?

Will it cause an audit?

Am I being too conservative and paying unnecessary taxes?

Here is a piece of information that most CPAs do not tell their clients: The US court system’s motto of “innocent until proven guilty” does not apply when it comes to tax law. It is imperative to understand that the IRS and the Tax Law do not adopt that same theory. Rather, it can be concluded that under the IRS, a taxpayer is actually “guilty until proven innocent.”

This means that tax payers need to prove their position in order to win the battle with the IRS. What is stated in the tax law is that the “burden of proof lies with the taxpayer.” This means that if the IRS questions one of your transactions, you need to prove your position in order to prevail. If you cannot support your position, then the IRS will automatically prevail because, again, the burden of proof is on us as taxpayers. As ludicrous as it sounds, the IRS does not need to prove that they are wrong!

To be clear, I am not trying to scare you away from taking the tax deductions that are legally available to you. I do want to make sure that you are well equipped to defend yourself in the unlikely event of an audit.

Related: 5 Clever (& Legal) Tax Strategies to Save Real Estate Investors Money

So what are some things that we should be doing to protect ourselves? Let’s take a look:

Be Proactive

Although the IRS is gearing up its audit efforts, this does not mean that we should abandon all tax savings strategies. Rather, we should still plan for ways to legally reduce our tax liability. The only difference now is that we should be proactive in our planning. So take the responsibility to contact your tax advisor and work with them throughout the year to both maximize your tax savings and reduce your audit risk.

Delegate

If you were to get audited by the IRS, make sure you send your tax advisor to meet with the IRS. Don’t represent yourself. There are two reasons for this:

  1. You are too close to the situation. Remove yourself from direct contact with the IRS agent to ensure you don’t say something you will regret because IRS agents can make your life extremely hard!
  2. You want to have your tax advisor represent you in front of the IRS agent to push back time. When your CPA meets with the IRS, he or she can defer answering questions on the spot by indicating that he will need to confer with you, the client.

Related: Your Tax Write-Offs Could Affect Your Ability to Get a Loan: Here’s How

Start on Solid Ground

Lastly, make sure you are working with tax advisors who have a good integrity to begin with. Ensure you are working with someone who is qualified and strategic in helping you to implement your tax saving strategies. The IRS has started to focus on CPAs who file tax returns with unsubstantiated deductions. This has been a great income lead for the IRS. Once they find such a CPA, they may actually audit each and every one of that CPA’s clients, and chances are, the IRS will prevail over all those other taxpayers as well. To ensure that you are protected, make sure you are working with tax advisors who are strategic rather than aggressive.

How do you safeguard yourself against audits?

Leave a comment below, and let’s talk!