If you are living or working outside of the US and draw an income from there, you should declare your taxable foreign income by filing your tax returns and offshore bank accounts. The IRS has been cracking down on taxpayers who have taxable income outside of the US but have not been declaring them in order to evade taxes. Two months ago, the IRS concluded its most recent Offshore Voluntary Disclosure Initiative (OVDI) in which thousands of taxpayers with offshore income participated. Under the OVDI, participants who declared their offshore income were spared criminal prosecution and only had to pay the due penalties.

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Does the IRS Owe You Money?

Uncle Sam may be looking for you because the IRS owes you money. A total of 99,123 refund checks amounting to $153.3 million have not been sent to its owners due to mailing address errors. This comes up to $1,547 per person.

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IRS Commissioner Doug Shulman proposed that Forms 1099, W-2 and other documents be collected ahead of the full filing of income tax returns by taxpayers. This will give the IRS time to reject returns that didn’t match records before processing, reducing burdens on the agency and on filers.

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The IRS will be employing a new system designed to ensure greater tax compliance. SAS, a business analytics software and services company, has won a $6.25 million contract to support IRS’ new electronic Return Review Program system. With this system the IRS intends to make significant inroads in reducing the tax gap of approximately $345 billion each year. The tax gap is the difference between the amount of taxes that should be collected and the amount of taxes actually paid on time each year.

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Here are the tips we have covered so far in how to reduce your taxes next year:
1. Pay no more than you should
2. Max out your 401s
3. Sell your loss making shares
4. Write off the biggest tax breaks
5. Make charitable donations
6. Make significant charitable donations
7. Make energy-efficient home improvements
8. Avoid buying mutual funds before the ex-dividend date

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