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Pahrump Mirror
Pahrump, Nevada
April 3, 1997     Pahrump Mirror
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April 3, 1997

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16 Thursday, April 3, 1997 Pahrump Valley Gazette Are You Audit Bait? Calculate your chances of being audited00l[00..000000 by Wilson Smith  N. This worksheet is based on the studies of Amir Aczel, a statistics professor at Bentley College in Waltham, Mass. and author of How to Beat the IRS at its Own Game (Four Walls Eight Windows, $10.95; 800-626- 4848). Aczel studied some 1,300 returns in an effort to crack the Internal Revente Service's secret audit-selec- tion formula. His findings: 90% of audits are triggered by the size of deductions you claim relative to your income level. (The other 10% stem from such problems as mathematical er- rors or reporting earnings that don't match those on your W-2 forms.) Of particular interest to the IRS are deduc- tions claimed on: Schedule A (itemized deductions) Schedule C (unincorporated businesses) Schedule F (farm income) If you don't file any of these forms, chances are slim that you'll be audited. If you do, though, you'll want to fill out thisshort worksheet to determine your chances of being audited. Worksheet Schedule A (itemized deductions): Enter your Schedule A amount (from line 28 of sched- ule A): $ Enter your adjusted gross income (from line 31 of form 1040): $ Divide your Schedule A amount by your adjusted gross income .% Schedule C (unincorporated businesses): Enter your schedule C expenses amount (from line 28 of schedule C): $ Enter your schedule C income amount (from line 7 of schedule C): $ Divide Schedule C expenses amount by Schedule C income amount: % Schedule F (farm income): Enter your Schedule F expenses amount (from line 35 of schedule F): $ Enter your Schedule F income amount (from line I 1 of schedule F): $ Divide your Schedule F expenses amount by your Schedule F income amount % Worksheet Results Schedule A (itemized deductions): If you file a Schedule A with itemized deductions add- ing up to more than 35% of your adjusted gross in- come (total income less deductions), you enter the au- dit danger zone. Once these deductions reach 44%, the IRS computer is almost certain to tag you for an audit. Schedule C (unincorporated businesses): If you file a Schedule C for business expenses, you're on safe ground if your deductions are less than 52% of your schedule C income. But if they reach 65%, you can expect a letter from the IRS. Schedule F (farm income): With a Schedule F, you're a likely target when your deductions reach 59% of your income. At 68%, you can bet the farm you're a goner. Bottom-line Although you might still be audited for other reasons-- figures that are just a little TOO round, or a sloppily prepared return--the level of deductions above falls within the bounds ef what Dr. Aczel has found to be acceptable to the IRS. How Time Flies When Having Fun Death and Taxes, it's often been said, are the only true certainties in life. A historical review would appear to add credence to as- sumption as suggested by the following timeline from the archives of the Chicago Tribune: 1,683 years of tax paying fun A t/me//ne 313 A.D.--Emperor Constantine abolished torture, cru- cifixion and tax informers, calling them "the greatest scourge of mankind." l)4---Congress levies a 2 percent tax on incomes of more than $4,000. Only one in every 10 Americans is rich enough to pay the tax. 1909 - The State of V'nginia enacts an income tax, but huge numbers of its citizens simply refuse to pay it. Tax agents go into rural counties to collect it and are never heard from again. 1913 -The 13  Amendment to the U.S. Constitution is adopted, authorizing the creation of the income tax. Tax protestors believe the amendment was not properly ratified. The IRS and the courts take a dim view of this position and suddenly the jails see lots of activity. 1916 -A 1913 tax act is amended, to change the income that can be taxed from "any lawful business" to "any busi, hess" clearing the way for taxing such activities as boot- legging, gambling and other illegal revenue-producing ac- tivities. 1925--U.S. Sen. James Cottzens of Michigan charges that millions of tax dollars are being lost through the favorable treatment of large corporations by the Bureau of Internal Revenue, Several days later, Couzens is notified by the bu- reau that he owes $11 million in back taxes. 1929--The National Tax Foundation estimates that aver- . age Americans will work 19 minutes each day to pay for their federal income taxes. 1931---Chicago's own AI Capone goes down for tax eva- sion. 1939--Those fun, fun guys at the National Tax Founda- tion estimate the average American will work 40 minutes every day to pay their federal taxes. 1944--Income taxes rise to their highest level in history - beginning at 23 percent and rising to 94 percent on in- comes above $200,000. 1949--NTF estimates that average Americans will work 1 hour and 16 minutes of each work day to pay their federal taxes. 1956----Contestants who win the top prize on TV's "The $64,000 Question" find they have only $25,000 after fed- eral income taxes. 1971--IRS spends $50,000 in an attempt to collect $232 from an impoverished Mexican-American woman who works part-time as a maid. The agency loses the case. 1972---A poll by the Advisory Commission on lntergov- emmental Relations finds that the American public rates the federal income tax as the fairest of all taxes. 1980--A poll by the Advisory Commission on Intergov- ernmental Relations finds that the American public rates the federal income tax as the least fair of all taxes. 1980--One-time Dallas Cowboys' lineman Thomas "Hol- lywood" Henderson's Super Bowl ring is put on the block to settle a $156,000 tax debt. 1986--Congress passes Ronald Reagan's massive Tax Reform Act. What started as simplification resulted in one of the most complicated laws ever conceived in this galaxy. 1988----Charles Wacker lIl, grandson of the man for whom Wacker Drive was named, was named in a 16-count indict- ment, changed with using an international shell game to dodge more than $5 million in personal and estate taxes. 1989--NTF estimates that average Americans will work I hour 47 minutes each work day to pay their federal taxes. 1992---George Bush' loses election, in part, over broken read-my-lips pledge of "no new taxes:' 1996---Bill Clinton wins re-election despite broken pledge of a "middle class tax cut:' 1996--The IRS responds to furor over its brutal and in- trusive "economic reality" audits by changing the name of the program (now "financial status" audits) and by telling its agents to be reasonable---unless they don't feel like it. Survive Tax Season With These Stay-Healthy Strategies The weeks before April 15 are a taxing time; stress runs high as you search for receipts, figure out forms and, if you owe Uncle Sam, scrape together cash. Getting caught up in the tax time frenzy can also mean ignoring the basics to good health like proper eating, exer- cise and rest. Try these stay-healthy tips from the Centrum Center for Nutrition Science to glide through this tax sea- son with many happy returns. Audit Your Eating Habits - Stress can take its toll, but a healthy diet help keep your body at its best. Eat a wide variety of foods each day - consume plenty of breads, cereals, rice, pasta, fruits and vegetables. Enjoy moderate amounts of low-fat milk, yogurt and cheese and lean meats, poultry and fish. Go light on fats such as butter, margarine, salad dressing and oil, and on sweets such as sugar, candy, jelly and soft drinks. Keep energy at its peak by eating meals and snacks on a regular schedule. If you are like most Americans and aren't eating a proper, well balanced diet every day, consider taking a complete and balanced multivitamin/mineral supplement. Make Time to Exercise - When you are busy and stressed, exercise may be one of the first things to get dropped from your schedule. Try to incorporate exercise into your regular routine. For example, park further away from the office or mall and try to take the stairs when possible instead of the elevator. Exercise will not only build endurance and strength, but will also decrease anxiety and tension. Even brief periods of exercise can help reduce stress. The Centers for Disease Control states that just 30 minutes of mod- erate physical activity most days of the week can be beneficial. If your work day is particularly stressful, take a brief time out. For example, squeezing a lunch time walk into your schedule will not only help to relax you, but a 20 minute walk can help burn approximately 110 calories for an aver- age 150 pound person. Find Time To Relax - Continuous anxiety can leave you exhausted and unable to function at your best. Avoid excessive caffeine - too much can make you jittery. You can powerfully influence your mood by consciously changing the rhythm of your breathing. If you get stressed during the day, set everything aside for a minute, take a deep breath and exhale slowly. Don't do your taxes right before bedtime. Take a few minutes to wind down before you try to go to sleep - take the phone off the hook, put the receipts away and set aside your concerns for the night, ff you still have trouble sleep- ing, try reading a book or taking a warm bath. For a free copy of the USDA brochure, "Nutrition and Your Health; Dietary Guidelines for Americans" and a re- frigerator magnet illustrating the food gde pyramid, please call 1-800-597-CCNS. I I i WELI00ILLING LLC Well Drilling Complete submersible Pump & Water Tank System Installed Power Pestal (200amp) Trenching for Power and stall Water Lines from Well to Home 00.gptic Systems Includes: Pen:. Test Construction Permit Occupancy Permit Pads m Mobile Home Garage Driveways Lot Cleared 0 Lic# 17562A & 17563A -. 727-5435 591 S. Buol Rd. P.O. Box 56, Pahrump, NV