Making Taxes Less Taxing
BY LAURELLA DESBOROUGH
Copyright Laurella Desbrough (eclectusbreeder.com).
All rights reserved by the author.
The Tax Bite
In the past two years, there
have been numerous bird breeders
who have been audited by the
IRS. The IRS has raised the
issue of hobby versus business:
Breeders are expected to prove
that they indeed are running a
business and not just taking
deductions for an expensive
hobby. For instance, in the San
Francisco Bay area, newspapers
printed articles about the IRS
targeting "unusual" small
businesses on the assumption
that these businesses were
potentially not quite
legitimate. In other areas of
the country, we are learning of
audits on large and small bird
breeders.
Many people have a great fear of
an audit by the IRS. If you are
filing tax returns regarding
your bird business, you have
probably read the informative
articles by tax experts David
Sefton and Jim Hawley in bird
magazines. As they recommend,
keeping detailed records is an
absolute must. For instance,
when audited, you will have to
provide a detailed mileage log
to support the mileage
deduction. If any of your
deductions or calculations
involve original breeding stock,
you will need documents
detailing purchases or trades.
If you have followed all these
recommendations and you are
audited, you may find that the
auditors are adamant about your
tax status and demand additional
money. Statements such as, "We
will disallow that deduction!"
have been heard by some breeders
who have been audited.
One aspect of the problem is
that the IRS auditors, and even
tax attorneys, are not familiar
with the bird breeding business.
Another aspect of the problem is
that many of us have some pet
birds and some birds that have
been "retired" from breeding.
These birds should be excluded
from the tax paperwork. Bird
breeders who are in an
unresolved and difficult tax
audit situation with the IRS
might benefit from advice from a
tax attorney.
Other Options
In dealing with IRS audit
problems, if you have done your
paperwork correctly and followed
the rules and you are making no
progress with the audit, a visit
to your Congressman may be
helpful. Before you schedule a
visit, prepare well. This is a
last-ditch effort and should be
undertaken with great care or it
also will not succeed. Prepare a
one- to two-page outline of your
tax situation with simple, yet
detailed, statements. Elected
officials are quite busy and
have a lot of people demanding
their attention. You have to
make your particular problem
very clear in a few minutes. You
may have only 15 or 20 minutes
to present your case. You need
to present your outline in paper
form, speak to what is on the
paper, answer questions and then
take the guidance given.
Most likely the Congressman will
listen, ask a few questions,
determine whether or not your
problem can be addressed and
then direct an aide to assist
you. The aide will do the actual
work of providing names and
numbers of one or more
individuals who can be contacted
to help you. These people may be
within the IRS agency or outside
of it. The aide will then be
your contact person as long as
needed. It is recommended that
you pursue this course of action
only after all else has failed;
after you have worked with a tax
attorney and been unsuccessful.
This is a last resort, not a
first effort. After your visit
to the Congressman, send a
thank-you letter for his or her
time and attention.
