Tax Help: The Advantages of Roth and Traditional IRAs

When it comes to saving for retirement, it can be confusing.  Tax help and tax deduction advice is often conflicting.  My goal here is to clearly explain how some simple retirement accounts work.  There are several types of retirement accounts you can have, depending on your occupation and income level, so it’s really a broad subject.  Here I want to focus on the individual retirement account (IRA) options out there, since many taxpayers choose these account vehicles for retirement saving.  As for additional retirement account options (like a 401(k)), how much and when to save, and what to invest in, I’ll leave that alone for now.

The IRS gives most of us, depending on our income levels, an opportunity to invest $5000 a year in an IRA (or $6000 if you’re over 50 years old).  There are two basic types of IRAs you can open, a Roth IRA or a Traditional IRA (there are a few others, like SIMPLE IRAs, that I won’t get into here).  Both accounts have tax advantages, but in exchange for lower taxes you lose some freedom to withdrawal and spend the money you put in.  So the liquidity of your retirement savings is reduced, but so is your annual tax debt.  In this way, the government is trying to encourage you to save for your retirement.  Each IRA is different in exactly how it is taxed and they have different eligibility rules, so I’ll describe each one separately.  Note that you can open both accounts, but your $5000 annual limit is used up as you contribute to either account.  In other words, in total both your contributions to each account cannot exceed $5000.

Contributions to a Roth IRA are post-tax, meaning that the money you put into your account has already been taxed.  There is nothing special about this, as many of you do the same thing when you deposit your paychecks into a checking or savings account after income taxes have already been pulled out.  Once you put your money into the account, you have the same flexibility as any brokerage account in that can invest in just about anything you like: stocks, mutual funds, REITs, bonds, commodities, or you can even leave it in cash.  Now, the great thing about a Roth is that not only does the principal and earnings grow tax-deferred, but when you start withdrawing your money in retirement, no taxes are due!  This means all of your earnings are never taxed.  This is a huge tax advantage, especially if you can save at a young age and your earnings grow to be large.  A few other facts about a Roth you should know:

•  Contributions for a tax year are due by the due date of your tax return, NOT including extensions.

• You can contribute to a Roth without penalty in a given year if your adjusted gross income (AGI) is $116,000 or less for single filers.  Compensation for IRA purposes is working compensation, meaning the $116,000 total does not include things like interest, dividends, rental income, pension payments, annuities, partnership income, etc.  This limit does change some tax years, so be sure to check before contributing if you’re on the border.  If you made more than this and you still contribute, then your contributions are considered in excess.

• You cannot contribute to your IRA past age seventy and a half.  If you are older than this and contribute, your contributions are considered in excess.

• Excess contributions over $5000, if your AGI is too high, or you are older than 70.5 are subject to a 6% excess tax.

• You cannot withdrawal money from a Roth before age fifty-nine and a half.  If you take out money before this age, these withdrawals are subject to a 10% early distribution tax.  There are some exceptions to this, including: money for a first home, money for qualified education costs, money for medical insurance, and money for annuity contracts.

• You NEVER have to withdrawal money from your Roth IRA if you don’t need to.

     Now for your main alternative, the Traditional IRA.  This account gives you the option of deducting from your taxable income the amount you contribute.  Thus, you can put in pre-tax dollars into a Traditional IRA.  Like a Roth, your earning grow tax-deferred in this type of IRA, but the difference is that BOTH your earnings and the principal you put in throughout the years are taxed as income upon withdrawal. So in a Roth you pay your taxes first and enjoy no taxes later in life, while in a Traditional you can avoid paying taxes now but will have to pay these taxes upon withdrawal.  This is the fundamental difference between the two.  Now, just like a Roth, once you put your money into the account you have the same flexibility as any brokerage account in that can invest in anything you want, with some very minor exceptions.  Below are a few more facts you should know about a Traditional IRA: 

• Contributions for a tax year are due by the due date of your tax return, NOT including extensions.

• The phase out amount for being able to deduct your Traditional IRA contribution is an AGI of $63,000 for single filers and $169,000 for married filing jointly filers. Remember that compensation for IRA purposes is only working compensation, meaning the total does not include things like interest, dividends, rental income, pension payments, annuities, partnership income, etc. 

• You cannot contribute to your Traditional IRA past age seventy and a half.  If you are older than this and contribute, your contributions are considered in excess.

• Excess contributions over $5000 or you are older than 70.5 are subject to a 6% excess tax.

• You cannot withdrawal money from a Traditional IRA before age fifty-nine and a half.  If you take out money before this age, these withdrawals are subject to a 10% early distribution tax.  There are some exceptions to this, including: money for a first home, money for qualified education costs, money for medical insurance, and money for annuity contracts.

• You HAVE to withdrawal money from your Traditional IRA by April 1^st of the year after you turn seventy and a half.  I know that sounds like a confusing and random time, but that’s the IRS rule.  If you don’t make the required minimum withdrawal, you may be subject to a 50% excise tax on the amount not distributed.

Tax Help on the Schedule A for Itemized Tax Deductions

The Schedule A, also known as the long form.  We hear about it from friends and family, especially during tax season.  You know, from people who tell you about what you can and can’t write off as a tax deduction on your personal income tax return.  We all want the tax help and advice to maximize our tax deductions and reduce our taxes.  To help out, I’d like to clear up some of the misconceptions floating around and make it clear to you what items you can deduct.  First I’ll give you a basic idea of what the Schedule A Form is and when to use it, and then, of course, some of the common write offs you can take.

Most individuals fill out a Form 1040 when preparing their taxes.  On this form, Line 40 is where you can do one of two things: either take a standard tax deduction or put the total tax amount from an attached Schedule A.  How do you know which amount to use?  The only way to know is to fill out a Schedule A and then compare the total you have there to your standard deduction. 

The standard deduction amount varies depending on your filing status and the tax year: in 2008 married filing jointly or qualifying widow(er) it was $10,900, head of household was $8,000, and married filing separately or single filer was $5,450.   If the total deduction shown on your Schedule A is less than this amount, you will pay less in taxes if you use your standard deduction.  In other words, use the standard deduction!

Generally speaking, those who own homes and pay large mortgages, those who have large medical bills, or those who incur a lot of business expenses not covered by their employer are the typical taxpayers I see who end up using a Schedule A.  For many other people, however, the standard deduction is larger and thus should be used.  The following are some common deductions and rules you should know as you fill out your Schedule A:

• You can deduct home mortgage loan interest on your main and second home.  Only the person who is liable for the loan can make this deduction, even if someone else is actually paying the mortgage. It also must be a home, as only interest on a land purchase isn’t deductible. 

• Equity line of credit loan interest is deductible.

• Personal property taxes, like for a home, are deductible if they are charged on a yearly basis and are based only on the value of the personal property.

• Transfer taxes are NOT deductible as real estate taxes.

• Qualified medical expenses in excess of 7.5% of your adjusted gross income (AGI) are deductible.  A few specific points I see often: lodging at a hotel during a surgery is deductible at $50 per night per person, the cost of home improvements for medical reasons is deductible minus the value increase in your home, and general health improvements (like a gym membership) are NOT deductible.

• Medical insurance premiums are deductible and are not subject to the 7.5% rule.

• Medicare A (covered under Social Security) is NOT deductible on Schedule A as a medical expense.

• State and local income tax is deductible.

• Qualified business expenses in excess of 2% of your AGI are generally deductible.  Meals while on business are only deductible 50%.

• Property losses can be deducted up to the portion not covered by insurance.  Disaster losses in a Presidentially-declared disaster zone are also deductible. 

• Charity contributions are deductible, but are limited to a maximum of 50% of your AGI.  There are many specifics when it comes to donations, so I advised you speak with a tax professional before you donate to make sure you document your gift correctly. One note: if you donate a car, you can deduct the smaller of the free market value of the car on the date of transfer or the gross proceeds from the sale of the car by the organization you donated to.

• Margin interest is deductible.

• Gambling losses are deductible only up to the amount of gambling winnings. 

• Personal bad debts are not deductible on the Schedule A because they are considered short term capital losses, and as such are limited to $3000 per year.  Any balance can be carried forward.

Practical Family Tax Planning; Get to Know the Gift Tax Rule.

 Yes, the Federal government has bailed out Wall Street, Detroit, and spent stimulus money at an unprecedented pace in an attempt to avoid a deeper recession. States across the country have massive budget shortfalls. Our government at all levels (Federal, state, and local) will be reducing benefits and increasing taxes to help pay for it all. An article published last month on CNN Money discusses this development at the state level:  http://money.cnn.com/2009/12/04/news/economy/state_tax_increases/index.htm

In this environment, it is imperative that you have a good handle on tax issues and know how your decisions affect your taxes. The name of the game is reducing your tax debt to protect your money from these higher tax rates we all know are coming. Here I'll tell you about a little-discussed tax topic to ensure you keep your money with your family and not hand it over to the IRS: financial gift giving.

Did you know that you can give anyone up to $12,000 a year completely tax-free? It's true. The IRS allows gifts of up to $12,000 without any taxes due. And if you're married, between you and your spouse you can give $24,000 to any individual before taxes. 

This is called the annual gift tax exclusion, and it is very useful in many practical ways. First, it can be an effective way to pass your wealth to the next generation without having estate tax problems, which are currently being discussed for increases in Congress. For example, if you're married and have 3 children, you and your spouse can each give each of you children $12,000 a year tax free. That means you can effectively give $72,000 each year ($24,000 combined to each child) to your children without worrying about paying Uncle Sam. Talk to a tax representative to set this up, as it may involve establishing a trust depending on how you want things arranged. As you see, it pays to know the rules and plan ahead.

There are also several types of gifts that are not subject to this tax: gifts for qualified education expenses, qualified medical expenses, gifts to charities, gifts to your spouse, or gifts to political organizations. So paying your child's tuition or a loved one's medical expenses does not count as a gift that could be taxed. Another good point to know is that if you give a present to someone, like a car, you must report the free market value of the gift at the time of the transfer on Form 709. I often talk to people who assume they can subtract the amount they spent on the car as their cost for the gift, but this is not true. 

You have to fill out Form 709, the Individual Gift Tax Return, if your gift to any one person or group is greater than $12,000 (including a future interest), you and your spouse are splitting gifts, or if you gave your spouse interest in property (like your house) that will be ended by some future event (like death). 

Just knowing about this exception is powerful tax knowledge as you plan your tax savings and try to hold onto your wealth in these trying times. You now know something most people don't when it comes to taxes. There are a few details about gift giving you should know about before you give someone a large gift, and I don't want to get into them here for the sake of all readers. However, I do recommend you discuss your specific situation with your tax representative before you start making big moves to make sure you're doing things correctly.

Offer in Compromise or Uncollectible

Offer in Compromise (OIC) is the best thing since sliced bread. You owe $100,000 in tax debt to IRS. You make an offer for the debt settlement of $1,000 or even less and they accept it. How good is that?

Does it happen all the time? Not by far. Most offer in compromise applications are rejected. Who wins and who loses is what we want to talk about?

In any IRS negotiations, the outcome must be one of three, either an installment agreement, uncollectible status, currently not collectible (CNC) as the IRS calls it or an offer in compromise. In my opinion offer in compromise is superior to all when a taxpayer has the ability to choose either the OIC or the CNC.

Although, unlike the offer in compromise, uncollectible status requires you to pay zero, I still contend that the offer in compromise is superior to the non collectible status.

We frequently choose to seek an offer in compromise for our clients rather than the non collectible status, even when both are available to the client. Why would any one in his right mind choose to pay money for an offer in compromise when he or she could get away with zero? 

There are two main important reasons for that. The first is the penalty and interest. The second is that the uncollectible status can be an apparition which may be resurrected to torment you in the future. The key thing to understand about the currently not collectible is the word currently. It means although we, the IRS, cannot collect form you now, we have not forgot that you owe us money. 

The minute the IRS sees that you have a raise or some money is coming your way, they will summon the spooky ghost to knock on your door and demand everything; all prior taxes that you owed and then some. And then some? Yes and then some.  The IRS wants you to pay the tax debt, all the tax debt and the interest and the penalty thereon. My friends, the IRS computer has been ticking all along when they declared you CNC. They did not attack you but their computer is preparing for a day of reckoning.

Now, let me ask you a simple question: you have a tax problem of $100,000 and you have the option of paying $1,000 in an offer in compromise that will put the tax debt to rest once and for all. $1,000 will erase your name from among those who have an IRS problem for eternity. On the other hand, you can pay zero now as uncollectible but have Big Brother watching you for years to come, waiting to take your wallet. Big Brother smells the scent of money and he's coming your way, again. Need I tell how to cast your vote? Ok, take the offer in compromise, my friends and then dissolve your tax problems in the ether.

Offer in Compromise - 80% Rejected by IRS

Let us start by defining what an offer is. An offer is one of three solutions, no fourth (unless you pay the full amount of debt in cash.) If you have a tax problem with the IRS, you will end up doing either an installment agreement, seek to be declared uncollectible or non-collectible classification as sometimes they refer to it, or make an offer in compromise.

Offer in compromise is then one of IRS debt settlement solutions whereby we offer IRS an amount less than what you owe. The question is how much and how do we determine that? In general, you must think as follows: The IRS will not accept any amount less than they can grab from you. IRS is not in the business of charity. I have seen IRS seizure of cars of people who are on social security and have kidney failure!!  Ruthless? In this instant, yes. Is there a way to avoid this? Of course, and that is another animal unto its own.

So, we offer the IRS what they think they can take. If we have $500 that they see in our bank we must offer them that plus any thing else that they see we have equity in. To calculate the equity, we will only offer them 80% of the fair market value of the assets that we are reporting minus liability on it.

Here's an example:

John is unemployed with no income and owes the IRS $150,000. He has $750 in the bank. He owns his house with a fair market value of $100,000. The loan on the house is $75,000. His equity on the house according to this calculation is $25,000 (value of $100,000 minus $25,000 loan.) So, at first glance one may think that we should offer IRS $25,000 for the equity in the house and 700 for what we have in the bank for a total of $25,700. Correct? If you have done that, I have a water front property in Arizona, as they say to sell you. If we were to do that offer we will make an offer on the $150,000 IRS problem for only $5,700.

How did we figure the $5,700? Remember that I said that we will offer IRS only 80% of the fair market value of the house. Since the fair market value of that house was 100,000.  80% of this amount is $80,000.  Since we don't own the house outright and that the bank owns $75,000 in that house (the mortgage amount), what is left really is 5,000 after the bank gets his cut and title company when well the house. Add $700 which is in the bank to the offer of $5,000, that brings the offer to settle amount owed to IRS for back taxes to $5,700.

Notice in the example above that I said that John is unemployed. I did that not make an assumption that the IRS feels sorry for unemployed folks and thus accepts lower offer in compromise just for that, but the purpose was to say that he has no income that the IRS takes a stab at, either voluntarily or via income and wage garnishment. 

So, now we are ready to give John some monthly income to make the picture more realistic. Let us say that John makes $5,000 per month and his expenses are $4,900 a month.  That means he has $100 to spare every month. Does the IRS look for an amount as little as $100 per month. You bet. You will be surprised to know that the $100 a month could be worth $12,000 of debt owed to IRS, more of explanation to come later. Let us assume that the collection statute of limitation is still available in full to the IRS (10 years in which the IRS can chase the takes payer.)

In this case the IRS looks at the $100 as I stated above to be worth $12,000. How is that? $100 of monthly surplus means $1,200 a year. Since the IRS can take this amount via wage garnishment or by a negotiated settlement for 10 years then you are looking at $12,000. In this instance, John who has owes IRS 150,000 for back taxes and has a house worth $100,000 and $700 in the bank, we can offer the IRS the following:

Amount from house equity as we explained                                            $5,000

Amount from $100 monthly surplus that we must offer                             12,000

Amount we currently have in the bank                                                      700

The total for the offer then must be                                                    $17,700

To summarize, our offer now is composed of amount of income over expenses and the net assets.

More to come on following blogs

IRS Tax Debt Collection Attempts - Is it a Levy or Property Seizure?

Generally speaking, an IRS tax levy such as a bank levy, garnishment, or an accounts receivable levy (taking the tax debt amount from other people who owe you.), all end up in the IRS by a check.  So, a levy or garnishment is an IRS collection action in which they get a check in the amount they determine from either your bank or from your employer.  The IRS uses Form 686, Intent to Levy Notice, to initiate the process.

IRS property seizure is something bulky the IRS will get in its collection efforts to satisfy a tax debt.  They will get a clunker, a boat, a piece of land, or any other type of asset they can take, and eventually auction it off to collect for back taxes. Again, Form 686 is used.  Example of serving this notice: IRS embarks on seizing property in an effort to collect on back taxes owed, such as a car which is parking in a commercial parking lot. The IRS will, once again, use Form 686 to deliver to the attendant. The IRS will give the attendant Form 686-A, Notice of Levy and demand the car be turned over.  Amazing power?  No court order is needed, no nothing.

IRS Authority to Levy, Issue Garnishment, or Attempt Property Seizure

Does the IRS have the authority to execute a levy, garnishment, or property seizure? 

They sure do. The Internal Revenue Code (IRC) authorizes a levy as a means to collect delinquent taxes (IRC 6331). It is permitted for any property, or rights to property, that belong to you.

Required IRS Notices for Levy

IRS must deliver the following notices:

1. Notice and Demand for Payment for Tax Debt

2. Notice of Intent to Levy

3. Taxpayers Right to a Collection Due Process Hearing (CDP hearing)

Can You Appeal an IRS Intent to Levy?

Yes, there are two ways:

1. You may request a Collection Due Process (CDP) hearing by filing Form 12153 no later than 30 days from the time you receive the levy notice.  The Office of Appeal will issue a determination as to whether the levy was issued correctly or not.  If you don't like the decision of the appeal, you can go to United States Tax Court within 30 days after that.

2. You can also appeal a federal levy or garnishment under Collection Appeal Program (CAP) regardless of the taxpayer's ability to appeal under The Collection Due Process (Such as missing the initial 30 day deadline required for the CDP).  CAP is independent from the collection function. It gives administrative relief to taxpayer.  It is a chance for an administrative review. Quick cautionary note on this point: Unlike the CDP, a CAP cannot be challenged nor can the amount of the tax liability.  You cannot proceed under CAP to Tax Court.

Back Taxes - Unfiled Returns Versus Filing Taxes

We all know that with filing our taxes we will have to pay if we fall short on the payment of tax liability. In our minds it is usually a negative experience. Many people delay filing their taxes because they know they will have tax debt to IRS, ultimately incurring back taxes.

But the question is: Is this the smartest move? I would argue it is not.

Let us look at the advantages and disadvantages of filing late returns versus not filing taxes at all.

Let us see if there are any advantages of filing returns in time. 

1. The intuitive thing is that you are complying with the law and avoiding negative consequences that can be serious, like being accused of fraud. So in that sense, filing may only bring one thing, peace of mind. To many, that may be enough.

2. Sometimes people have unfiled returns so as not to owe taxes but they did not get around to doing it as time goes by. The greatest harm is when they are due a refund that they will not be able to collect because they are barred by the refund statute of limitation. I have seen people lose thousands of dollars in one year because they neglected to file. Ask yourself this:

How long does it take to collect the information and prepare the tax return. Eight hours?

Is working eight hours worth losing three, four and even as much as five thousand dollars?!?!

How many times can you make five thousand dollars in one day? It is a crime not to file if you're entitled to a refund. Always remember that you will make two or three thousand dollars in the few hours that it will take to prepare the return if that is the amount of refund you will get.

3. Protecting the collection statute of limitation. If you filed the tax return and the IRS did not audit you, they can no longer audit your return after three years. Also, if you filed and you owe taxes $10,000 or even $100,000 and for some reason the IRS could not collect the tax debt, then you may have just avoided paying a tax owed to Uncle Sam.

4. Sometimes your CPA, your tax attorney or tax professional will be racing against time to file the unfilled tax returns in order to negotiate an agreement such as Installment Agreement, Uncollectible Status, and Offer in Compromise or remove a tax levy or garnishment that is crucial to remove quickly. Had the filing been done previously, the thrust of the effort now on the negotiation. By not filing the returns, sometimes you may have to wait more than three months before the IRS posts those late returns.

5. IRS employees may be more lenient when you negotiate if all taxes are filed.

6. Finally, If you don't file, the IRS may file taxes on your behalf. They call them substitute for returns or SFR. You are always worse off, when IRS prepares your taxes. For example, if you sold carpet for $100,000 and they discover that, your income in their books is $100,000 never mind that you paid $80,000 to buy the carpet. They are not going to volunteer to acknowledge your expenses.  The hammer is falling and falling hard. Claim your deduction, Mr. (or Mrs. to be politically correct)

Now, let us look at the benefit of not filing the tax returns.

The one obvious benefit is that you don't hear from them as long as they don't discover you. For how long do you have to hide from them? Forever!!

Remember what we said when you file? Do you remember that we said you only have to hide 10 years?

Let us see what are they going to do if filed the tax returns and what also let us take a look at what they will do if you don't file and you don't have money in either case. Has anyone told you about the blood from the turnip?

If you don't have it, you simply don't have it. More over they may willing even to forgive the debt if prepared properly if you had filed the return.

But if you don't file, have money or not have it, they may send you to the slammer. This is just an example.

File. Would you? There is a solution for everyone.

Tax Audit Help

What IRS Does After the Audit Notice:

1. Typically they will look at the year they are auditing plus one or two years (before or after) if the year in question produced more taxes for them.

2. They will usually audit income and some expense items such as travel, mileage and number of claimed exemptions.

How To Prepare For Your Tax Audit:

For Income:

1. Examine the returns for the year they specify and have the other two adjacent years available as well. 

2. Order bank statements for the years that are under audit.

3. List deposits by month and get a total for the year.

4. Make sure to identify non-revenue deposits such as loans and account transfers

5. Order all transcripts for income and wages for the three years.

6. Compare the income per the transcripts to income claimed on the tax returns and the total deposits for every year.

7. Obtain support for non-revenue deposits such as documentation of loans, gifts or account transfers.

For Expenses:

1. Among the popular expenses audited by the IRS are travel and car expenses.

Car Expenses

2. To prepare a car defense, it is good to have a car log.

3. If you are a sales person, or courier for example, your log should be daily and should show how many miles you have on the car every morning and how many driven each day. Should include stops in between.

4. Just three or four months of that log is sufficient.

5. Get a reading of the odometer by a neutral party such as a repair shop or an oil lube shop.

6. Taking the mileage route may be easier than documenting each and every car expense.

Travel

1. Travel usually relates to out of town travel; you may need evidence with receipts (such as hotel receipts, meals and flights).  There is a per diem amount allowed by the federal government that changes from one local place to another and may range anywhere from $150 to $250 per day.

IRS Tax Help News

WASHINGTON - Individuals e-filed a record 95 million federal income tax returns during 2009, up almost 6 percent from last year's total of nearly 90 million. About two out of three taxpayers e-filed this year; out of the 141 million returns filed so far this year, over 67 percent were e-filed, compared to 59 percent last year.

Each year, more taxpayers chose to e-file their tax returns. While the total number of tax returns has increased 10 percent during the past decade, the number filed electronically has increased by 168 percent. Taxpayers who e-file from a home computer continue to be an increasingly significant segment of those who e-file.

 

Year   Filed	Total Returns	e-Filed  Returns	Percent e-filed
2000	128,430,000	35,412,000	27.57%
2001	130,965,000	40,244,000	30.73%
2002	131,728,000	46,892,000	35.60%
2003	131,557,000	52,944,000	40.24%
2004	132,200,000	61,507,000	46.53%
2005	133,933,000	68,476,000	51.13%
2006	136,071,000	73,255,000	53.84%
2007	140,188,000	79,979,000	57.05%
2008	153,650,000	89,853,000	58.48%
2009	141,376,000	94,980,000	67.18%

Home Computer e-Filers

This year, for the first time, more than a third of e-filers are filing their returns themselves from a home computer. More than 32 million returns were e-filed from home computers, up almost 20 percent from last year's record of 27 million. People filing from their home computers account for about 34 percent of all e-filed returns from individuals.

Direct Deposit Refunds

Almost 73 million refunds were electronically deposited into taxpayer's accounts, saving the government mailing costs and saving taxpayers a trip to the bank. More importantly, these taxpayers received their refunds at least a week sooner than those receiving a paper check.

These direct deposit refunds accounted for 66 percent of all refunds, up from 62 percent of refunds last year. Overall, the IRS issued 110 million refunds, averaging $2,753 per refund; direct deposit refunds averaged $2,997 per refund.

Free File

More than 3 million taxpayers filed their tax returns for free through the IRS Free File program. This year for the first time, taxpayers could also file directly to the IRS by completing a Form 1040 on IRS.gov; 273,000 taxpayers used this new way to file.

 

2009 FILING SEASON STATISTICS
Cumulative through the weeks ending 10/17/08 and 10/16/09
Individual Income Tax Returns	2008		2009		% Change
Total Receipts	153,650,000		141,376,000		-8.0%
Total Processed	152,759,000		140,718,000		-7.9%
E-filing Receipts:
TOTAL	89,853,000		94,980,000		5.7%
Tax Professionals	62,932,000		62,786,000		-0.23%
Self-prepared	26,921,000		32,193,000		19.6%
Web Usage:
Visits to IRS.gov	323,463,010		266,631,821		-17.57%
Total Refunds:
Number	106,200,000		110,071,000		3.6%
Amount	$251.827	Billion	$303.069	Billion	20.3%
Average refund	$2,371		$2,753		16.1%
Direct Deposit Refunds:
Number	66,240,000		72,717,000		9.8%
Amount	$179.708	Billion	$217.915	Billion	21.3%
Average refund	$2,713		$2,997		10.5%

IRS Audit Summons

The IRS has the power to summon taxpayers to appear before its representative along with their records. This is contrasted with a tax audit where your representative will meet with the IRS without your physical presence. In IRS summons, if you decided to comply with the summon you will have to appear personally before the IRS.

The question is: Do you have to comply with the summon when you receive the notice? The short answer is not necessarily. The court held that the summons is not self-enforcing, meaning that you don't have to voluntarily submit to the summon without a court order? Does the IRS have the power to enforce the summons through the court? The answer is yes.

For the IRS to enforce the summon, it has to comply with its administrative procedures among which is that it must not inconvenience taxpayer as to the date and the time (it cannot be on weekends for example.) Also the IRS should issue summons for records that it cannot obtain without the summon. So if you submit records to IRS you may render the summon as not needed.

The courts also held that the summons cannot be issued as a tool of harassment of taxpayers. Summons must not be also a means of criminal investigation. You must consult your tax attorney or representative before you respond to summons issued by IRS.