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Charlotte Amalie
Friday, March 29, 2024
HomeNewsArchivesBIR Offers Tax Tips on Frequently Audited Issues

BIR Offers Tax Tips on Frequently Audited Issues

The Virgin Islands Bureau of Internal Revenue today offered guidelines to be prepared to respond to an audit.
“We are providing this information as part of a tax season educational campaign to help residents in preparing their tax returns accurately. The following items have been identified as five frequently audited issues,” according to Claudette Watson-Anderson, director of the V.I. Bureau of Internal Revenue.
1. Keep your tax records in a safe place:
All items on the income tax return are eligible for audit. To sustain an audit, you must provide documents to support the amounts taken as deductions, or show that you are entitled to receive a credit. For example, to support a claim for Earned Income Credit, you must provide documents to show that you maintain a household for your dependent for more than 6 months in the year. The documents may be utility bills, rent receipts, lease documents, mortgage documents, school records and birth certificates. Or, if you take deductions for rental expenses, please be sure to have the proof of those expenses, such as receipts, or cancelled checks, in order to get credit for the deductions.
2. Filing Status:
All taxpayers are urged to know their filing status. If you are not married at the end of the tax year, Dec. 31, then your filing status should be single or head of household. If you are married on Dec. 31, then your filing status should be married filing joint or married filing separate. There are exceptions to this rule, so check with your preparer to see what status you can qualify for.
3. Dependent Exemption:
Please communicate with your partner or spouse about who is entitled to claim a dependent on the tax return. Both parents, if filing separately, cannot claim the same child on their separate tax returns.
4. Relation of Dependent:
Please do not claim a dependent on your return that is not related to you. You will not be able to provide the documents that are required for the credits that you are expecting to receive if the dependent on your return has no relationship to you. In addition, if the dependent does not reside in the Virgin Islands, you may not be able to qualify for certain credits.
5. Self-employment tax:
Self-employed individuals are reminded that they are required to mail Form 1040-SS to the Internal Revenue Service, off island. Self-employment tax is not paid to the Virgin Islands Bureau of Internal Revenue; therefore, that tax should not be placed on the Form 1040 that is filed with the bureau locally. Please review your tax return before filing it with the bureau to ensure that there is no self-employment tax on the return.
As we begin the start of a new tax season, Director Watson-Anderson advises taxpayers to ensure that the information placed on their returns is accurate. She reminds residents that the return must be signed under penalty of perjury.
Questions concerning tax returns that are being audited should be directed to the Audit Branch, at 715-1040, ext. 2237.

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