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Tax Audits
Tax audit refers to the examination and verification of returns and other relevant tax documents submitted by a legal entity or an individual to the state’s tax agency. The audit is usually conducted by a certified public accountant.
1,102 Questions
Would a sudden addition of a large sum of money to one's bank account trigger an IRS audit?
No, not automatically. The IRS is not notified each and every time a person or company's bank account receives a larger than usual deposit.
However, personnel at banks have been known to manually make referrals to the IRS or other law enforcement agencies when they suspect a depositor has made a deposit of funds secured through unlawful means.
Does TurboTax do all federal state AND local taxes?
Yes, TurboTax has the capabilities of doing both federal and state income taxes. If you choose the free version for the federal taxes you will have to pay a fee to complete the state taxes.
How long do you need to keep income tax papers?
For most items of income and expense, three years is the normal rule.
However, for any item, such as depreciation on assets which can be claimed in excess of the normal three years, you will want to keep your papers for as long as you are claiming the asset.
Papers relating to your cost, or cost basis, in capital assets should be kept forever and handed down to whoever will inherit these assets from you.
What payroll tax is paid entirely by the employer?
The federal unemployment tax is paid entirely by the employer, being reported annually on a Form 940 filed no later than January 31st.
How many years do you have to keep records?
Depends entirely on the type of records, the business you're in and the State (which may or may not have something to say about things). As a ROUGH guess, try this: * FInancial -- 8 years * Health records 6 years required, more is better. * Property and dwellings -- indefinite. * A/R -- for the length of the business contract. * Govt. Contracts -- contract will specify.
How much is a person taxed if they withdraw their pension fund early before retirement age?
If you withdraw your pension fund before age 59 1/2, you might be taxed an additional 10 percent tax on early distribution of these funds. If applicable, the 10 percent tax is reported on line 58 of Form 1040.
You also must file Form 5329 (Additional Taxes on Qualified Plans and Other Tax-Favored Accounts) if either of the following apply. One, your distribution is taxable, and Box 7-Distribution Code(s) doesn't show Code 1 (Early distribution, no known exception, in most cases under age 59 1/2). Two, an exception applies but Box 7-Distribution Code(s) doesn't show any of these codes: 2 (Early distribution, exception applies, under age 59 1/2), 3 (Disability), or 4 (Death).
they are if you sell them and they create income. and also if they are bought with a view to their appreciating in value.
Do you incur penalties when you file an amended tax return?
The filing of an amended return does not automatically trigger the assessment of penalties by the IRS.
What could trigger penalties would be having a balance due, the amount of the balance due, and the reason(s) for that balance due.
What is the tax index number for capital gains in India?
Tax index number is the technique used to find out the current moneytary value of a capital asset so as to find out the difference between the sale proceeds and the value thus found out by applying the index for the purpose of charging tax on the difference. For this purpose 1981 is taken as the base year and it has been assigned an index no of 100, which is calculated on the basis of wholesale price index and the level of inflation in the economy.
What is a pro forma tax retrurn?
The term pro forma is used in the financial sense to denote financial projections or assumptions. A pro formatax return therefore, is preparing an estimated tax return at the end of the year, using the basic income, deductions, and the tax rules and regulations that are imposed. This may be done using tax tables and standard forms, or software which will utilize these references and do the math for you.
first written by Brianguy (not signed in)
What do you mean by transfer pricing?
transfer pricing is in the case of transferred with in the organisation the pricing of contribution for assets ,
Is there a penalty for not withholding enough federal taxes in your paycheck?
Uh, kinda. You have to pay whatever you owe plues penalty and intrest on underpayment, when you do your tax return.
Maxall company audit solution?
Meaning of Substantive Audit and the approach applied in EM's Audit of Maxall.
What do you think the auditors meant by the term "Substantive Audit"? Was the substantive approach appropriately applied in EM's audit of Maxall?
Here the term substantive Audit refers to the test of account balances with respect to the transactions relating to it.
Yes the substantive approach was appropriately applied in this audit which was confined to Accounts Receivables, in relation to sales.
Comparison of Audit Procedures that are in accordance with Generally Accepted Auditing Standards.
Identify and discuss specific audit process/procedures that the auditor(s) performed that were in accordance with Generally Accepted Auditing Standards.
We have got three types of tests performed under substantive audits, as per the Generally Accepted Auditing Standards, namely
(I) Test of Transactions,
(II) Test of balances
(III) Analytical review procedures.
(I) Test of transaction: It is an auditing procedure related to examining specified transactions and supporting documentation. It is part of the testing process used by the auditor to check internal-controls reliability. It is undertaken to gather evidence so that an audit opinion can be rendered as to the fairness of financial statement presentation. Included in such a test is verifying transaction amounts and tracing transactions to accounts in the financial statements.
Here this test was confined to Accounts receivable, sales and inventory.
(II) Test of Balances When EM compares the book balance of cash to the book balance, it is a test of balances. This is the step in which the Auditor seeks to obtain sufficient evidence to make a final judgment on the extent of losses or account misstatements that have occurred or might occur.
Here, in this audit, the CPA's obtained evidence relating to the Accounts receivables with respect to the sales made during the year. They found out that 6 invoices made at the year end and confirmed those with the concerned customers.
(III) Analytical review is an auditing process that tests relationships among accounts and identifies material changes. It involves analyzing significant ratios and trends for unusual changes and questionable items. Included in the analytical review process are: (1) reading important documents and analyzing their accounting and financial effects; (2) reviewing the activity in an account between interim and year-end, especially noting entries out of the ordinary; and (3) comparing current period account balances to prior periods as well as to budgeted amounts, noting reasonableness of account balances by evaluating logical relationships among them (i.e., relating payables to expenses, accounts receivable to sales).
Only a part of Analytical review was made by EM for this company. They made certain adjustments relating to sales and Provision for doubtful debts.
Identification of Audit Errors made by EM and Precautionary measures to be taken.
Identify the specific audit errors made by EM and discuss what the auditor
should have done to avoid the errors.
Inherent risk is the susceptibility of EM audit area to error which could be material, individually or in combination with other errors, as there were no related internal controls. Here we can see a possible error relating to Material. The material level was fixed at $35000 for 20x1 and $50000 for 20x2 which was not substantiated. There is no proper evidence to set these levels for the Material. As per the CPA standards the Material Level should be
Under single Rule
- 5% of pre-tax income
- 0.5% of total assets
- 1% of equity
- 0.5% of total revenues
Or
Under Variable rule
- 2 to 5% of gross profit, if less than $20,000
- 1 to 2% of gross profit, if between $20,000 and $1 million
- 0.5 to 1% of gross profit, if between $1 and $100 million
- 0.5% of gross profit, if more than $100 million.
These rules have not been followed here.
Comparison of audit in compliance with latest professional guidance.
The scope of a forensic audit is to fix blame or answer a question. A forensic audit seeks proof, not reasonable assurance. Here the auditors have conducted a normal audit. When they found out the sales made in late December 20x1 and 20x2 to Balco limited, was given 90 to 120 days credit limit, they should have enquired into the reasons behind it and should have gathered enough evidence for evaluating the credibility of the customer. But they accepted the Mary Maxwell assurance for this customer. This evidence clearly shows that this audit was not conducted entirely in compliance with the professional guidance regarding the forensic-type phase of audit.
Strategic audits are examinations and evaluations of strategic management processes including measuring corporate performance against the corporate strategy. Whenever a deficiency is noted or performance of an organization is sub-par, the organization may elect to perform a strategic audit. This may be done with in-house auditors, or an audit firm may be contracted to perform the audit.
The auditors will audit performance of the organization against the current corporate strategy and seek to identify problems within the current strategy that may be tied or can be traced to poor performance. Upon completion of the audit, a report will be created regarding the auditing firm or group’s findings and submit the report with recommended remedies to the management of the organization. The organization will then seek to implement the proposed remedies with hopes of increasing organizational performance.
How do you file taxes if you have worked under the table for two years?
You should seek out the assistance of an experienced, licensed (CPA/EA) tax preparer
who has done returns for nonfilers such as yourself.
You are probably entitled to deductions which could greatly reduce the tax you owe on the money you have been making under the table. You may even be entitled to a refund! ---- Its an "Honor System". You do not need a W2 or 1099 to report your income, CASH is taxable too :) You need to organize your income by source and you're entitled for expenses as related to the income generated. Lastly, if you can not pay the tax owed, you can settle your tax debt based on your financial situation.
How do calculate the tax have to pay on R350 000?
The amount of tax that you would have to pay on aR350 000 will depend on the amount of excetions on your taxes. It will also depend upon your filing as single, or married.
Why do businesses write off equipment?
Businesses write off equipment in an attempt to match the cost of the equipment against the income such equipment helps to generate.
Doing so gives the business it's best calculation of it's profitability. Without this attempt to match expense against income distortion of financial performance usually results, which leads to making erroneous decisions in management of the business.
In laymans terms: Writing off equipment keeps your hands out of your own money pocket. If you can get someone else to pay for it, do it, because eventually it will come out of the companys pocket. That's not good for business, profit or growth, and that's what makes the big American wheel go round and round......
Is there a penalty for too little tax withheld?
Yes...and interest too.
It's actually on the amount of estimated payments made relevant to the tax you owe....and has many safe harbors and qualifications. Taxes withheld are just one of many prepayment methods.
How can I get a copy of my tax records?
The most simple way to get a copy of your tax records is to go to the company you filed with and ask for a copy. By law, in the USA, tax preparation companies have to keep their customers taxes on file for at least 7 years in case the customer is audited (This law may vary by state). If you did not file with a tax preparation company the year of the record you require, or can't remember where you filed, then you'll have to contact your local IRS branch for a copy. This may take 6-8 weeks if the IRS is open (from January 1st until April 15th) and may take double that amount of time if the IRS is no longer accepting tax return information.
Is interest due during a tax dispute?
It depends upon the result of the dispute. if the liability to pay tax is confirmed on an appeal, interest accurues even during the period when the liability is in dispute. Because the liability to pay is there before the dispute and after the dispute. If the liability is deleted on an appeal, there is no liability to pay tax before the appeal and after the appeal. When there is no liability there is no interest there upon.
A tax shield is basically a tax reduction for some tax payers. Using a tax shield can help save cash flows and it will increase the value of a business.
