The Auto Loan Audit - Not Only To Avoid An Automobile Repo

Before you go through the pain and trauma of an automobile repo, or even a voluntary repo, the auto loan audit can be used to fight back and save your car, truck, SUV, boat, motorcycle, and even RV. In our current economy where work is slow, the repo man is as busy as ever. Even if the repossession of your auto happened up to one year ago, you can still seek remedy with an auto loan audit, which can uncover discrepancies, misrepresentation or fraud with the auto lender OR dealer. That's right, you can still fight back even if the vehicle was repossessed up to one year ago.

Most auto loans, up to an estimated 80%, have discrepancies, misrepresentation or even fraud in the loan documents. And quite frankly, there are a whole lot of raw deals going on out there. So no longer is an auto loan audit used solely to keep the automobile repo man away. Remedies can include getting your money back, modifying the loan, or even walking away free and clear, whether you are behind on car payments, or current.

Some lending violations may include inflated values, rewritten contracts, or even payment packing, a common practice in the auto industry to get customers to agree to purchase additional products, without disclosing the true impact on the monthly car payment. For example, the dealer may have misrepresented add-on products and told you that the purchase of a vehicle service contract, credit life and disability insurance, or a theft deterrent package would affect the interest rate. The finance manager may have used a line like, "The only way I could get the loan approved was with GAP insurance and a warranty." By law, no lender can require a customer to purchase these add-on products. While they could certainly serve a good purpose to the buyer, waiving these items should have no impact on the financing, and they should be offered strictly as optional products.

The Old "Can't Fund The Loan" Trick. After you drive the vehicle home, the dealer might call and claim difficulty in finding a lender to fund the loan. Then, they would require you to return the vehicle and renegotiate - sometimes without the option of getting all of your down payment or trade-in back. If you signed a binding contract, without any "pending bank approval" or similar language in the contract, they have no right to change the terms.

An auto loan audit examines any violation of Federal and State automobile repo law and laws governing vehicle lending practices, as well as the sales process and proper disclosure. Violations found during the audit review may prevent or even reverse an auto repossession or entitle the buyer to a refund or auto modification.

While there are many reputable car dealers and lenders, in any industry we have the good and the bad. Especially in this economy, where sales are slow and sales reps are hungry, we need to be even more diligent not to get the proverbial wool pulled over our eyes. What kind of add-on products have car dealers tried to sell you? Have you been forced to buy these products in order to get a better rate? Do you know someone who has been a victim of any of these practices? If so, forward this article, and fire away with your comments.

Ron Borch, with over ten years experience in the mortgage industry, is on a mission to save home & car owners from misrepresentation and fraudulent lending practices. http://www.firstchoicefamily.net

How to Avoid an IRS Income Tax Audit

What is an audit and why do individuals cringe at the word? The Internal Revenue Service issues audits as a regulatory measure to ensure that society is completing accurate tax returns. Sometimes they are issued simply to check on something that seems awkward or you might get picked for an audit simply because your number was picked. Avoiding an audit or decreasing your chance for an audit is quite easy.

First to avoid tax deductions, claim tax deductions that you are legally entitled to. If there are items that you are not sure about consult a tax attorney or tax professional - get legal advice about what specific deductions you are able to claim. If you do not have documentation to verify the claim of a deduction it is probably not a grand idea to go ahead and make the claim. Submitting documentation along with your return will assist in preventing red flags and avoiding tax audits.

The discrimination index function is a computer ran program that aids the Internal Revenue Service. Basically, your tax return is compared to the tax returns in the same income bracket. If any deductions or claims seem outrageous compared to others in your tax bracket - your tax return might be flagged for an audit. To help in avoiding a tax audit keep honest on your tax return and do not exaggerate any numbers. When ran through the discrimination index function you want your return to show up normal comparisons.

There are many things you can do to avoid tax audits. For example, first and foremost, keep track of all of your income. Keep copies of your W2's and 1099 forms, all receipts and any financial information that is relevant to the information submitted on the tax return. Keep all of this information organized, categorized and separated into specific years. Also, if you had help in preparing your return keep track of the contact information of the preparer that assisted you on the tax return. All of these above mentioned tips might not completely help you to avoid a tax audit but would surely be of help if you were chosen for an audit.

If you claim deductions instead of taking the standard deduction, any itemized listings that are exceptionally high for your income range might alert your return for an audit. To avoid a tax audit, keep honest and accurate with all of your charitable contributions especially. For example, please do not state that you have contributed $15,000 to a special organization if your annual income is only $35,000. This is not an action that someone would take it they are trying to avoid a tax audit.

It you are an owner or partner in a small business it would be in your best interest to try and avoid a tax audit. Filing a schedule C, which is required of small businesses, is tricky and complicated. If you are unfamiliar with taxes you should consult a tax attorney or tax professional. Avoiding a tax audit if you are a small business is almost next to impossible. The Internal Revenue Service is fairly certain mainly self-employed individuals try to hide or not report some of their income - this makes small business owners a target for tax audits.

Along the same lines of being self-employed, many individuals that receive a portion or all of their money in cash profits are a target for tax audits as well. To help avoid tax audits, be sure to keep all records of income either in a log book or computer program. Remember to report all income to the Internal Revenue Service and if your income is not currently taxed be sure to pay estimated taxes. These are also easy ways to avoid a tax audit.

If you are divorced both parties of the divorces wave a red flag for a tax audit the first few years. Be sure that you and your ex-spouse know which individual is claiming any dependent/s in the relationship. A child can only be claimed by one parent or the other. Many divorced couples work out a situation as to where the claiming years alternate. Also, if you are not in constant contact with your ex-spouse - be sure around tax season each individual knows who is claiming the dependent/s.

If you hold money or investments in off-shore or foreign accounts it is your responsibility to report the money produced and pay the appropriate taxes required for the funds. Holding off-shore accounts is legal but the taxes must be paid on them. If an individual does not report this off-shore income for any reason at all, criminal punishment can result.

The bottom line in avoiding a tax audit is simply being honest, accurate and filing in a timely manner. Keep organized and consult professional assistance whenever needed, especially if you have a specifically difficult filing situation.

Lydia Sweet is a contributing tax preparation expert for http://www.taxadvisr.com and has been working in the tax preparation field for 13 years. taxadvisr.com is a resource site for those preparing their federal and state income tax returns. Free E-File software, discussions, articles, reviews, forms and more can be found at http://www.taxadvisr.com

How to Avoid IRS Audits

Whether you're facing an audit or simply want to avoid one, here are 5 steps to take to deflect attention or get you prepared. Why me? You just got the invitation to a "party" that you hoped you'd never attend - an IRS audit.

How did this happen and how can you prevent it from happening again? We'll get to the how when we answer how to minimize the chances of an audit and how to survive one.

Rule 1: Check your arithmetic Few audits are generated by mathematical mistakes alone. The Internal Revenue Service computers automatically correct both mathematical errors and mistakes where you have claimed deductions that exceed limits set by the tax code itself, such as the 7.5% adjusted gross income limitation on medical deductions. However, too many of these kinds of errors indicate a sloppy return, and that that may lead to a full audit.

While it may seem obvious, let's not give the IRS any additional reasons to look at your return.

But how do you get picked?

An IRS computer program compares your deductions to others in your income bracket and weighs the differences. This secret IRS formula, called the DIF Score, is used to select returns with the highest probability of generating additional audit revenue.

For example, a taxpayer with a $50,000 salary would rarely have $10,000 in charitable contributions. This doesn't mean that, if you have only $50,000 in income and actually have $10,000 in charitable contributions, you shouldn't claim those deductions. It only means that if that is the case, be prepared to prove those deductions. The DIF formula considers not only your income and deductions, but where you live, the size of your family and your profession as well. Rarely will a family of five living in the Hamptons have an income of $30,000 or less. It may happen, but if it does, the IRS will want to know how. This leads to . . .

Rule 2: Arrange your finances so they don't stand out If you think you may be audited, see if your situation is likely to attract the tax man's attention. Here are groups that often do invite inquiries:

The self employed If you are self-employed, you have more opportunity to either "hide" your income or "create" deductions by converting personal expenses into business expenses. If so, be prepared to substantiate your expenditures as deductible expenses. The IRS is aware of the myriad "business vehicles" that go away to college every September, and the probability of your being audited is enhanced.

The audit rate for 2005 was 0.92%, up from 0.77% in 2004 and 0.65% in 2003.

Those who get their income in cash. The IRS has specific audit programs aimed at specific professions and occupations. Because they receive much of their income in cash, people who work in the gaming industry, waiters and even doctors are prime audit targets. The more cash you receive and the higher your income potential, the more likely the IRS is to find additional tax dollars by reviewing your return.

There are a number of kinds of areas of potential abuse that attracts the IRS. In recent years, the IRS has been targeting these areas for audit:

* Offshore credit card users

* High risk, high income taxpayers

* Investors in abusive schemes and promotions

* High income non-filers

* Unreported income

Rule 3: Substantiate. Substantiate. Substantiate In the audit itself, the IRS will focus on those items where taxpayers have historically failed to keep the required substantiation. Traditionally, auto, travel, meals and entertainment have been the areas most audited. To deduct auto expenses, you must establish the percentage of business use as well as the actual expenses incurred. I ask my clients to keep a mini-cassette recorder in their cars to record the business mileage and purpose. Kept contemporaneously, it is acceptable as sufficient substantiation of business use. Alternatively, a written diary of miles used for business would also be accepted.

You must have a receipt for all expenditures of $75 or more for meals and entertainment. The rule is simple: no receipt, no deduction. If the expense is less than $75, a diary notation is sufficient. However, both the receipt and the diary notation must have all of the following information:

* The amount paid

* The name and location of the restaurant or entertainment facility

* The person you entertained

* That person's business relationship with you

* The business discussion related to the entertainment

Unless you talk business, before, during or after the meal, your deduction won't be allowed. Remember, with the IRS, paper rules! With any and all expenses, deductions will be more easily allowed if you have a piece of paper to back them up.

Here's another piece of advice: Don't come in with a carton of miscellaneous receipts. The more "organized" your receipts and the more paper you produce, the easier it is for an IRS agent to conclude that you are organized, have full substantiation and owe no additional taxes.

One more point about how you're selected for an audit. The IRS computer selects many returns for audit on a random basis. Your income, deductions or where you live are irrelevant. Your number just came up -- you won the audit lottery. A student making $3,000 a year is just as likely to be selected as an accountant making $300,000. You just got "lucky."

The IRS can audit you for three years after you file your return. In reality, however, most returns are audited within 18 months of filing. This gives the IRS time to do the review and request the appropriate substantiation before the statute of limitations (usually the three-year period) ends. Once the statute has run out, the IRS normally cannot audit your return, and your expenses are insulated from examination. It has been claimed that the later you file, the less likely it is the IRS will pick your return to be examined. The IRS still insists that agents are not graded or evaluated on the amount of money they collect until -- surprise! -- congressional testimony reveals that policy is not the same as practice.

Rule 4: Know when to file I recommend that you have your return prepared early. If you have a big refund and are unconcerned with audit issues, file early and get your money back. If you have taxes due, and no penalty for underpayment, don't file until April 15. Don't ever pay a federal tax bill before it is due. It's an interest-free loan to the IRS.

On the other hand, if you are concerned about a potential audit, never file until the last minute. It won't hurt and can only decrease your chances of being selected.

Rule 5: Plan your taxes to preempt an audit I highly recommend the use of pre-audit strategies. If, say, you have a huge medical deduction for a year that you feel would increase your chances of being audited, attach copies of your medical bills to your return.

Alternatively, if you made an unusually large charitable contribution, attach a copy of the check or receipts to your return. The IRS computer will still kick out your return, but when a real person looks at it, the reviewer will recognize that you know the rules. It may actually reduce your odds of a full audit. IF YOU DO FIND YOURSELF THE SUBJECT OF AN AUDIT, WE CAN HELP!

Your entire tax audit case is should be handled by a lawyer, never by a "company." This means something and nothing should be overlooked or taken for granted. There should be no salesmen or assistants working on your confidential tax audit case at any time. Of course a tax lawyer may also rely on the valuable assistance of a select group of CPA's and professionals to help to develop your IRS audit case. But when it's all said and done, it is your lawyer's opinion and expertise that will be presented to the IRS and Tax Court judges. Please compare this level of tax audit service and applied expertise to that offered by companies instead of lawyers. You will be amazed at what a difference this extra protection and care can make in the outcome of your tax audit.

For a tax lawyer, typical clients are individuals, small businesses and professional people, and small-cap corporations who require the assistance of outside counsel at some time during their tax audit.

by: John Ellsworth, Attorney at Law at http://www.IRS-SOLV.com

Want to know more? Come to IRS-SOLV. Thank you.

How to Avoid an Audit

As tax time approaches, many people are wondering how to avoid an audit. This is understandable because facing an audit is one of the most nerve-wracking things that a person can go through.

Fortunately, there are a few steps that you can take to make sure that you are not audited.

The IRS uses a flagging system called the DIF (Discriminate Income Function) in order to find tax returns that may look suspicious. What this does is compares your tax return to others who earn similar incomes. If it catches something out of the ordinary, then a person will review it and decide whether it deserves to be audited.

Thus, the most effective way to avoid an audit is to not stand out. If you itemize your deductions in such a way that you are paying significantly less taxes than others with the same income, the IRS will notice this and flag you. Your goal is to be as close to everyone else as possible.

Sometimes, this simply isn't possible. Perhaps you had a lot of medical expenses this year that you would like to deduct. This is of course, perfectly legal, but it's likely to set off a flag in the automatic system. However, if you include copies of supporting documents, then the person who is reviewing the flag, will dismiss the audit.

Self-employed people are more likely to be audited, so if you are self-employed you would do well to form a corporation and file taxes that way. You will be less noticeable if you do this.

Additionally, make sure that all of your itemized expenses can be categorized. If you list too many expenses in the miscellaneous category, the IRS will think that you cannot substantiate those expenses and may be more likely to audit you. Itemized deductions that are frequently called into question are bad debt, casualty, medical, charity, and home office deductions.

The last important thing that you want to do is make sure that you check your math. Something as simple as an incorrect calculation could cause your return to be flagged for audit. This can happen frequently when you file your return by hand, so consider using tax filing software to help you out. They are less likely to make mistakes.

The TaxSoftwareSite has a great newsletter full of tax tips and additional ways to avoid a tax audit. If you want to avoid an audit this year, start out on the right foot by finding out which tax filing software is right for you.