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31Jul 2014

10 tax audit red flags- #Tax-fulThurs

taxerrorSource: Flickr

From being too charitable to claiming the home office deduction, beware these tax audit red flags.

1. You’re very charitable.

Be careful not to overstate your good deeds. The IRS has calculated the average donation level for each income range, so anything that far exceeds those amounts could cause the agency to take a second look at your return.

2. You deduct your home office.

The home office deduction is one of the most complicated and abused deductions in the tax code, which is one of the reasons the IRS is introducing a new, simplified option for claiming it this year.

3. You claim bizarre deductions.

Air conditioning for an excessive sweating disorder, a nose job for a wine taster — bizarre deductions like these are likely to spark suspicion from the IRS. But don’t let that stop you from claiming them if they are legitimate. Both the nose job and the air conditioning unit were allowed, for example.

4. You’re a millionaire.

Being rich has its benefits, but not when tax season rolls around. The more income you report, the higher the likelihood you’ll get hit with an audit.

5. You claim the same child someone else does.

If your ex files their taxes before you and claims your child as a dependent, the IRS is going to be very suspicious when your return comes in claiming that same child as your dependent.

6. You have money abroad.

The IRS has been on a crusade to retrieve money that’s been illegally stashed in overseas accounts. So even if you have money in a perfectly legal account abroad, you need to report it or you could be in big trouble.

7. You claim the Earned Income Tax Credit.

Fraudsters love the Earned Income Tax Credit, a refundable credit of as much as $6,000 depending on your income and how many children you have (the more children, the bigger the credit). That’s why the IRS tries to make sure that this credit is only doled out to people who deserve it.

8. You deduct gas costs.

Most employers reimburse you for driving-related costs like gas. So if you try to deduct hundreds or thousands of dollars’ worth of automobile costs as a business expense, that’s going to raise eyebrows at the IRS.

9. Your “business” is really a hobby.

Who wouldn’t like to turn their favorite hobby into a business? Year after year, taxpayers continue to report losses on their taxes from businesses that are really just activities they like to do for fun.

10. You fail to report income.

For many people, reporting income is pretty straightforward. But for those who earn money a variety of different sources, it can be easy to forget a stray account.

Originally posted and shared from: http://cnnmon.ie/1j5C44t, by Blake Ellis, March 19, 2014 11:37 AM

 

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